The trouble with the housing market

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That was the cover story for the renowned The Economist magazine last week (March 24-30th issue). The Economist is my favorite magazine and always offers expert, measured opinion on all matters around the world. The enormity of the American mortgage market crisis is revealed by its taking of the cover of such a magazine.

In there article they cite a few statistics that I wanted to share with you that caught my eye. I particularly wanted to share these with the fine folks at Active Rain who stopped by my blog and told me that their market areas currently presented an excellent time to purchase a home. For those that think it is a great time to buy, that we are near the bottom, that you can pick up properties on the cheap, please review these three comments from one of the most influential magazines in the world.

A new study by Christopher Cagan, an economist at First American CoreLogic, based on his firm’s database of most American mortgages, calculates that 60% of all adjustable-rate loans since 2004 will be reset to payments that will be 25% higher or more. A fifth will see monthly payments soar by 50% or more.

The harshest year will be 2008, when many mortgage will be reset and few borrowers will have much equity.

A glut of unsold homes will also push down prices, particularly in areas such as California and Florida, which had a disproportionate share of riskier loans.

My recommendation is simply reinforced by these quotes. If you are planning on buying a home, wait. The amount of supply that will be coming on to the market in the form of foreclosure auctions and "motivated" sales will further depress prices. You’ll be able to get a better deal as we get in to 2007 and 2008. I stand by my opinion that fall of 2007 will be a good time to begin looking or buying a home.

The Economist also makes a very prescient point that I hope all of the politicians sounding off to gain favor in an election year remember:

Few doubt that the subprime mess was, in part, a regulatory failure. But now the mistakes have been made, the biggest risk is that populist politicians rewrite the rules hamfistedly. … But an ill-conceived swathe of new "consumer protection" could easily make matters worse.