New Century Corporation is still big in the news, due to their massive fallout in the sub-prime mortgage market. It goes to show you that a business strategy that focuses upon one specific line of business, albeit, a high profit margin is an extremely risky strategy. My bet is that the sub-prime market will stabilize soon, if the rates remain low and the refinance market still allows home owners the option to refinance into fixed-rate mortgages. Plenty of home owners will become caught in bad position and there will be a bunch of foreclosures, which will affect the Mortgage-Backed securities market, but the mortgage lenders that have a diversified mortgage product line should hold out rather well and maybe even give them an edge in the sub-prime market once the market stabilizes to some degree.

Housing starts fell 14% in January but in February they rose 9% to a seasonally adjusted rate of 1.535 million homes. A good sign, but down 28.5% from February 2006.

Housing Starts rose 18% in the South and 26% in the West, but declined 14% in the Midwest and 30% in the Northwest.

Basically, housing is all over the place right now. The common commentary asks; “Is the mortgage market is going to go down fast? Or trend down over a period of time?

The latter is the best and most probable, because that is what everyone wants to happen. Let the home prices drop slowly, for an average decrease of 10-20% then flatten out and gain strength again. This might actually be healthy for the economy and bring the typically percentage of the common persons budget that goes towards housing back around 25 – 30%.

Builders still need to get housing inventory back in line with housing demand. Once this happens then we should hopefully see a leveling out of the housing market.

All the Best,

James Nexus

CompareYourLoans Contributing Editor