by Calculated Risk on 2/05/2007 12:53:00 PM

From the MBA: The Residential Mortgage Market and Its Economic Context in 2007

Some interesting data and comments. The MBA is fairly optimistic:

Click on graph for larger image.

The housing market is nearly back to normal. The housing market will regain its footing by mid-to-late 2007, depending on what measure is used. Home sales and starts will likely begin to increase in mid-2007, but, given the large inventory overhang, prices are unlikely to show any significant increase until late 2007 or early 2008.

On the trade deficit:

The primary reason for the relatively low level of long-term interest rates is the massive inflows of global capital into U.S. fixed income markets. These capital inflows are the flip side of the historically large U.S. trade deficit.

On mortgages:

Interest only (IO) loans, with both adjustable- and fixed-rates, and payment option loans that allow negative amortization, have become a very important part of the market. In the second half of 2005 and the first half of 2006, IOs accounted for about 25 percent of the dollar volume of originations. In addition to their use as affordability products, these products offer homeowners an innovative and flexible means to more actively manage their home equity.
...
Much of the stock of outstanding loans has been originated in the past three years. This has implications for mortgage delinquencies and foreclosures, as loans tend to hit their peak delinquency rates three to five years after origination. We estimate that more than 80 percent of outstanding loans have been originated since 2002.