Reverse Mortgage Industry Needs Housing to Bottom, Fiserv Says Not Yet

image Lately, I’ve been thinking more about what needs to happen for reverse mortgage volume to grow and while I’m not sure there is any “silver bullet”, housing values bottoming out is pretty close.

Principal limits have been cut and without housing values stabilizing, seeing record growth in 2010 is going to be a challenge.

Unfortunately, a new forecast of real estate prices from Fiserv estimates that home values will drop in 342 out of 381 markets during the next year. Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, with some stabilization for the following year with prices rising 3.6%.

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Mark Zandi, chief economist with Moody’s Economy.com, agreed with Fiserv’s current assessments and told CNNMoney that, "I think more price declines are coming because the foreclosure crisis is not over," he said.

In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June — after having already fallen a whopping 48% during the past three years.

If Fiserv’s forecast holds, Miami real median home price will tumble to $142,000 by June 2011.

Homes: About to get much cheaper

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  • Admin, your assessment is right on point. With the alleged volume of shadow inventory and delayed foreclosure action, the Fiserv assessment may be a significant understatement of further erosion in home values. It is doubtful if it is an overstatement.

    While no prognosticator, lenders and originators should be preparing to weather a long winter season. There is little doubt that Mr. Peter Bell is right; those who survive the immediate future should be in a very strong position to take advantage of the turn around. Like most industries dependent upon ever increasing home values, there will be upturns as well as downturns. Right now we are in a retracting and rebuilding mode.

  • Hard to imagine that anyone considering a reverse mortgage now or in the next three years would use this as a reason for waiting.

    Do we really think that folks are saying to themselves “I think I'll wait for my home's value to reach its' lowest point in years, then I'll do it.” ?

    These folks have already lost the 10% by waiting, and more thru increased margins. When (if?) housing values turn back up, they will likely be accompanied by rising interest rates..which as we all know will easily eat up any gain in value.

    Absent unforeseen changes, will a homeowner ever have more money available to them (and in the future with credit line growth)then they do today, right now? This is all information I convey as delicately as possible to my clients. It can be hard to hear. Once I have shown them a few scenario's of values,rates and age they can at least make an educated decision.

  • Peter,

    The problem is not the desire of seniors. NRMLA did a quick survey and believes the 10% PLF reduction means 20% fewer seniors will qualify. The reason for the 20% drop is LTVs. The existing debt is just too high compared to value so fewer seniors have the equity needed to qualify.

    The 10% reduction of PLFs was directly related to lower home value appreciation projections and a poor decision by the Administration to ignore industry standards. If home values go up, existing LTVs rise and so will PLFs. Reduced home appreciation rates is a double edged sword.

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