I found this article with comments by David Rosenberg, Chief Economist & strategist with Gluskin Sheff on the housing market.

“If the Fed stops buying mortgages and the government allows the tax credits to expire as planned at the end of the quarter, then we would expect housing activity to roll over. As it stands, the excess supply of residential real estate and the valuation with respect to wages and rents is still high enough to suggest that a renewed 10-15% decline in average nationwide home prices is in store. That would double the number of households who are “upside down” down on their mortgage to 30 million, and add further congestion to the foreclosure pipeline (RealtyTrac just published a forecast concluding that a record three million U.S.

As the Beige Book pointed out, the demand for loans in the consumer/housing sector remains tepid at best. Big, big problems coming the FHA‘s way as losses mount (and after the government extended the $200 billion additional lifeline to Fannie and Freddie to keep these entities solvent – it’s not well known just how much government-administered tape & glue is keeping the system together, including accounting rules on Level 3 assets that have prevented widespread failure for what are truly insolvent large banks in the USA).

Moreover, the $1.4 billion writedown by SocGen yesterday was really a shot across the bow that the problems in credit are fully behind us. The problems are now spreading towards the prime mortgage market where creditworthiness may be better but the problems with negative homeowner equity are at least as acute, and this is a market that is five times the size of subprime”. homes will be foreclosed this year – 4.5 million will be filed – up from 2.8 million in 2009). Foreclosures in Q4 were up 18% YoY and filings are continuing to run at alarming double-digit annual rates as well. Therefore, with so many delinquent loans overhanging asset values and the financial system no wonder the banks show no inclination of extending credit any time soon.

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