Wednesday, May 19, 2010

Morgage delinquencies - are they a red herring or real trouble?

The Mortgage Bankers Association noted today that the number of people who missed a payment increased to records levels indicating a possible future rise in foreclosures. These are the same folks who told us a couple of months ago that the threat of foreclosures was essentially gone.

So, is it all negative hype to sell papers or do we have a real problem?

I say it's hype! Why? We also heard today that consumer prices dipped for the first time in a year and that wholesale prices dropped .1% in April. With consumer prices dropping it seems to me that people will have more money in their pockets. They'll either save it or use it to pay the mortgage.

Either way, money is incredibly cheap right now and 20% of foreclosures are being snapped up by investors. If inventory is being bought up left and right, how can we have a problem.

These "projections" of possible outcomes on the overall economy are nothing more than a red herring to distract regular homebuyers and keep the opportunities open for investors. As home inventory has been bought up in the local area, prices have started to rise. If consumers are kept out, investors will buy and prices will be kept flat - in the investors best interest.

That's my theory, I'm sticking with it. We need less media hype and more focus on financial reforms to help keep solid consumer buyers in the market.

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