Thursday, January 14, 2010
Spotted over at The Big Picture, a sobering view of the U.S. housing market from Laurie Goodman of the Amherst Securities who collected all the current mortgage delinquency data and determined that a total of 7 million homes are likely to default over the next year or so.
The probability of a borrower recovering after missing one payment (25 percent) or two payments (5 percent) is shockingly low, at least when you look back a few years. As I recall, about 90 percent of homeowners who received a notice of default (after the third missed payment) avoided foreclosure back when home prices were still going up and unemployment was much lower. Obviously, those two factors have made a world of difference.
Of course, the GSEs are on the hook for most of these losses and Laurie has an even more sobering estimate of what that will cost - $448 billion (see this item at TBP for details).