While a hopeful nation looked on as President Obama took the helm, financial experts continued to tune in to the battered economy. At the forefront of that crisis is the real estate market. As the new President entered his first official full day in office, the housing index for the first month of 2009 was published by Wells Fargo and the Home Builders Association. The survey canvasses nearly 420 builders in the housing industry for their opinions about how confident they are about their industry. The confidence indicated by the index decreased to a level not seen since the mid 1980s. The confidence of builders in the industry has been declining for over 2 years. Builders were some of the first and most drastically affected by the declining real estate market and crisis in the credit industry, as they struggled to compete with lower prices and the glut of unsold homes. Although mortgage interest rates are very low, demand for new homes is not expected to increase much in the coming year. In fact, many analysts anticipate that the slump will continue for at least another year. Some analysts think that a recovery is dependent upon government programs and policies to encourage qualified consumers to start buying again. The National Association of Home Builders, for example, is pushing for increased tax credits and a reduction in mortgage rates for consumers buying a home in 2009.
Home building is just one industry expecting a slow 2009. The largest mortgage insurer in the country, MGIC Investment Corp., predicted that it would continue to be unprofitable in 2009. As the recession worsens and unemployment continues to rise, many mortgage insurers will struggle as mortgage defaults increase. Risky mortgage practices undertaken by many banks and investors came to head in 2008 and left many homeowners holding the bag of declining home values. Many under qualified borrowers were able to obtain subprime mortgages during the housing boom. Some consumers were certain the housing market would continue to climb, thus took on an adjustable mortgage to buy a home and mortgage they could not afford. As a result, mortgage insurance companies like MGIC are paying out claims from lenders more and more as defaults rise. That is quite a contrast to just two short years ago, when private mortgage insurance was one of the most lucrative types of insurance offered by companies. Mortgage insurers like MGIC are hoping to utilize some of the $700B from the federal bridge loan to help them through 2009. President Obama has said that preventing mortgage foreclosures should be a priority in any plan to help boost the real estate sector.
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