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. It was at its lowest point since 1985, which is when the index started. Home builder confidence has been waning since May 2006. The credit crisis and economic downturn hit home builders particularly hard, due to the resulting rising home foreclosures and significant increase in the inventory of existing homes. In spite of historically low rates for mortgage loans, most experts do not anticipate an increase in interest for new properties in 2009. Many housing experts do not expect the building industry to pick up until 2010. Some in the industry think the only thing that will pull the housing sector out of the slump is government intervention. Offering consumers tax incentives or low mortgage interest rates to purchase a new home are some examples of such intervention.
Builders are not the only ones predicted to have difficulty this coming year. Mortgage insurers, most notably MGIC, are not anticipating much profitability either. As the recession worsens and unemployment continues to rise, many mortgage insurers will struggle as mortgage defaults increase. Loose lending standards over the past decade allowed almost anyone who wanted a mortgage to get one. Many under qualified borrowers were able to obtain subprime mortgages during the housing boom. Other consumers simply bought a home priced beyond their means, sometimes with an adjustable rate mortgage that has since reset, and are now struggling to make those mortgage payments. As a result, mortgage insurance companies like MGIC are paying out claims from lenders more and more as defaults rise. It is hard to believe, but just a couple years ago, mortgage insurance was the most profitable line of insurance in the business. MGIC and similar mortgage insurers are hopeful that the newly inaugurated administration will offer some assistance to them. The new President has made it clear that any economic stimulus plan will need to help stem mortgage foreclosure rates, if there is any hope for a revitalization of the housing market.