Think the housing industry is in a slump? According to a survey of banking risk managers from FICO, home prices aren’t going to regain their 2007 levels until 2020. If that wasn’t bad enough, the group of Professional Risk Managers says mortgage defaults are being predicted to persist for about 5 more years. That means no home appreciation until around 2020.
No Home Appreciation Until 2020?
Of course, the results are merely a survey – but a survey of professionals who make their living assessing risk (albeit a tad bit pessimistically). The survey came back indicating that 49% of respondents expect housing to take anther 9 years to get back to its 2007 peak levels. 21% believed it would regain those levels in less time. As early as January and February of this year, risk managers had been somewhat optimistic about the housing recovery, but now they seem to be hedging their “bets”.
“Hedging” is a bit of an understatement – this is more like a 180 degree reversal.
Regarding the mortgage defaults, over 70% of banking respondents said they expected mortgage defaults to stay at above-average levels for at least another 5 years. Nearly half believed the amount of defaults and late payments would actually increase over the next 6 months (and only 15% disagreed, betting on a decline).
The bad news was news to us because it reflected a take on the housing market, but the full report dealt with auto loans, credit cards and student loans as well – and none of it looked very good. Small businesses, in particular, are expected to face almost antagonistic and challenging credit environments, where obtaining funds for doing and expanding businesses will be very tough and stringent. Over 1/3 of the risk assessors surveyed estimated there would be an increase in small business loan delinquencies.
The only good news seemed to be an estimate that credit card usage was also on the decline. While this is bad news for banking, it does reflect a positive trend towards more sensible consumer debt practices – one that is necessary for a healthy economy, despite what bankers and the Fed may desire to the contrary.
What’s your outlook? Do you have a different viewpoint? If so, let us know in the forum link below, or post a message on Facebook.