The Bottom Line
A Roaring Housing Market, But Will It Last?
Thursday, November 14, 2002; 3:06 PM
Housing Bubble Waiting to Burst? Some analysts are speculating that the housing market is a bubble that will burst like the stock market. They point to a jump in foreclosures and delinquent mortgage payments as evidence that many who have entered the housing market cannot afford to stay. Stuck Under a Load of Debt (The Washington Post, Nov. 8, 2002) The Many Faces of Mortgages (The Washington Post, Nov. 9, 2002)
In the second quarter of this year, foreclosures rose to 1.23 percent, reaching a 30-year high, from 1.1 percent in the previous quarter, according to the Mortgage Bankers Association of America. Stuck Under a Load of Debt (The Washington Post, Nov. 8, 2002) 2nd-Quarter Foreclosure Rates Highest in 30 Years (The Washington Post, Sept. 14, 2002)
Delinquent mortgage payments, those outstanding for at least 30 days, were also on the rise and reached 4.77 percent, one of the highest rates in the past 10 years. 2nd-Quarter Foreclosure Rates Highest in 30 Years (The Washington Post, Sept. 14, 2002)
According to the Mortgage Bankers Association, Doug Duncan, MBA's Chief Economist attributes the increase in foreclosures to the rise in unemployment and Americans having trouble paying their bills. Unemployment Rate Rises to 5.7 Percent (The Washington Post, Nov. 1, 2002) 2nd-Quarter Foreclosure Rates Highest in 30 Years (The Washington Post, Sept. 14, 2002)
Housing Market Continues to Soar The housing sector however, continues to show strength amid worries about the sustainability of the housing market. New Milestone for Hot Real Estate (The Washington Post, July 26, 2002)
Consumers, driven by low mortgage rates and a bearish stock market, flooded the housing market, pushing new and existing home sales to record highs last year and sparking a refinancing boom. Low Rates Boost Sales Of Homes at Torrid Pace (The Washington Post, Oct. 25, 2002) Housing Starts Up to 16-Year High in September (The Washington Post, Oct. 17, 2002) Low Rates Boost Sales Of Homes at Torrid Pace (The Washington Post, Oct. 25, 2002)
The Commerce Department reported July figures for new home sales rose 6.7 percent, beating expectations and setting a record, while existing home sales rose 4.5 percent in the same month. Housing Sales Up Strongly in July (The Washington Post, Aug. 27, 2002)
Federal Reserve Chairman Alan Greenspan told Congress three months ago that he doesn't believe there is a housing bubble. Instead, he attributed the "sizeable gains" in home prices to "the effects on demand of low mortgage rates, immigration and shortages of buildable land." Federal Reserve Board: Testimony of Chairman Alan Greenspan
In addition, the Commerce Department recently reported the supply of new homes on the market dipped slightly in June to the lowest level since December 2001. Housing Growth Seen Continuing (The Washington Post, June 25, 2002)
Boom in Refinancing As mortgage rates have fallen, homeowners have jumped in on the action by locking in low rates, cashing out some of their equity and putting money in their pockets.
Thirty-year mortgage rates fell to 6.11 percent, the lowest rate in 32 years and fifteen-year rates beat an 11-year low at 5.48 percent, according to Freddie Mac. Just two years ago, the average for a 30-year fixed-rate mortgage was 8.24 percent. 30-Year Mortgage Rates Fall (The Washington Post, Nov. 8, 2002) Mortgage Rates Again Hit Lows (The Washington Post, Aug. 9, 2002)
A report from the Mortgage Bankers Association of America shows 72.1 percent of all mortgage applications filed in the last week of August were refinancing-related, up from 70.8 percent in the week prior. 30-Year Rate Falls Back to 6.22% (The Washington Post, Sept. 1, 2002)