Foreclosures will peak by the end of next year and unemployment will climb above 10 percent as the housing market and U.S. economy grapple with the aftermath of the recession, the Mortgage Bankers Association's chief economist said Tuesday.
Many lenders have issued a moratorium on foreclosures, causing a drop in the number of discounted, bank-owned properties hitting the market this year. But some economists expect that a wave of foreclosed properties could hit the market in 2010, dampening home prices again.
rising unemployment will lead to a growing number of foreclosures at least through the end of next year, Brinkmann said.
"We're forecasting about another 10 percent, roughly, price decline between now and the first quarter next year," he said.
Mortgage rates, meanwhile, will average about 5 percent through the end of this year, then rise to 5.6 percent by the end of 2010. That should help fuel a 12 percent increase in home mortgages next year, but home refinancing will decline as mortgage rates edge higher, he said.
"We're assuming, in a sense, weak or little inflation here," Brinkmann said.
Unemployment is the main reason US foreclosures continue to rise. The recession might technically be over, but it really won't be over until people can be confident they will have enough money to survive.
The number of households caught up in the foreclosure crisis rose more than 5 percent from summer to fall
The foreclosure crisis affected nearly 938,000 properties in the July-September quarter
Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate — now at a 26-year high of 9.8 percent — isn't expected to peak until the middle of next year.