Mind Over Market

Prof. William Wheaton of the Massachusetts Institute of Technology, expects the housing market to come roaring back in the next few years. He gave his views today on CNBC's Squawk on the Street. The reason, he explains, is that household formation is creating demand that is far greater than the current rate of new home construction. Foreclosures and excess inventory are not so much of a problem because they are filling in the demand between new home construction and new household formation. The market is poised for a comeback even without the range of mortgage products that existed prior to August 2007, the professor says. He points out that in the past people were able to buy homes before the new mortgage products were available.

Deutsche Bank estimates that 14 million, or 26 percent of homeowners with mortgages, owed more than their house is worth in the first quarter of 2009. An estimated further 14 percent decline in home prices will drive up the number of homeowners with negative equity to 25 million or 48 percent of mortgagors by the first quarter of 2011, the bank forecasts. By Robert Stowe England August 20, 2009 Hopes that the housing market is now beginning to stabilize have been dampened by the release of a Deutsche Bank forecast on the level of negative equity among U.S. homeowners with mortgages. The study, "Drowning in Debt -- A Look at 'Underwater' Homeowners," was authored by Karen Weaver and Ying Shen at Deutsche Bank's U.S. research unit and can be found at this link: http://www.scribd.com/doc/18206788/Deutsche-Bank-Securitization-Reports-Drowning-in-Debt-A-Look-at-Underwater-Homeowners Based on analysis of data on 6.7 million non-agency loans compiled by First American Co...