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The naivety of housing bulls still surprises me, sending me into fits of hysteria as self-confessed know-it-alls try to convince me we’re bottoming out in housing. I’ve actually lost count of the number of faces I’ve laughed at over this. Truth is, we’re not bottoming. We’re not even close. As of now, let’s just say the bulls are still stuck in the first stages of Kubler-Ross with regards to subconscious housing grief – denial. Housing will get worse before it gets better.
Payment delinquencies and foreclosures with subprime ARMs spiked to 15.75% in Q1 2007, as compared to Q4 2006’s 14.44%. Plus, the foreclosure process in Q1 moved to 3.23%, the highest on record. Both only stand to worsen, as two million ARMs are set to reset this year and next.
And mortgages are on the rise. The average rate on a 30-year fixed now stands at 6.74% from 6.53%. That one-week move was the biggest since 2003. And it’s likely we’re headed to 7% on a 30-year. On the 15-year, we’re at an average 6.37% from 6.22%. A five-year ARM now sits at 6.37% from 6.24%.
We’re not out of the woods… not even close.
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