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PIMCO: House Prices Yet To Bottom

November 4, 2009

PIMCO’s head of mortgage bonds believes prices are going to continue to fall, particularly on the high end. As FHA loans tighten, and foreclosures begin to increase again, home prices will likely resume their fall which will continue to put pressure on household spending. The article also brings to light a statistic that the price indexes don’t factor in, and that is that approximately 7 million lender-seized homes are still yet likely to hit the market.

An S&P/Case-Shiller index for 20 metropolitan areas showed values rising 4.8 percent in the four months through August after a record 33 percent drop from its July 2006 peak. Such statistics are being distorted by U.S. efforts to reduce foreclosures, which are temporarily limiting sales of seized homes, said Scott Simon, Pimco’s mortgage-bond chief.

“It only makes prices look like they’re going up,” Simon said yesterday in a telephone interview. “Think about it this way: If you had 100 percent of the sales as foreclosure sales, prices would look like they went down a ton, and if you had none, prices would look like they went up a ton.”

… and here’s a sobering statistic:

About 25.3 percent of mortgages underlying the $1.7 trillion of U.S. home-loan securities without government backing were at least 60 days late, in foreclosure or already turned into seized property as of September bond reports, up from 20 percent in January, according to data compiled by Bloomberg.

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Categories: Commercial Real Estate Investing | Market Data | Trends
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