SAN DIMAS, Calif.-A sluggish economic recovery, less stimulus money and a tough job market will likely make mortgages an area of weakness in the second half of 2010.
"My feeling is that the second half of the year is going to be a little bit of a struggle," said Dwight Johnston, VP of economic and market research at WesCorp FCU.
While the first-time homebuyers tax credit may have pulled demand forward, fewer stimulus dollars entering the economy and continued re-defaults will likely result in a muddling housing market, according to Bob Dorsa said, president of the American Credit Union Mortgage Association. Mortgage applications plunged to 13 year lows in March and nearly 5 million homes are more than 60 days delinquent with the vast majority of agency mortgage modifications have resulted in re-defaults within one year. Without a "clear path" for those individuals through write-downs, forgiveness or foreclosure the market could be headed into the unknown once again.
"At some point in time that pipeline is going to have to start clearing and that means people who aren't making some kind of payment right now are going to have to start making some kind of one" or face losing their homes, said Johnston.
Though the housing market remains in fairly "uncharted territory," Joe Brancucci, executive VP at Tukwila, Wash.-based Boeing Employees CU believes that there are several strong reasons, including the historically low rate environment and a high housing affordability index, to be bullish on real estate lending. He pointed to credit union market share growth, which has risen to 4.5% today from 2% in 2006, and the need to attract younger members as reasons for continued emphasis on mortgage lending, even if the marketplace is not as strong, or immediately profitable as it was during the boom.
"Overall market activity, in terms of borrowers financing homes, looks today much like it did in 1999," Brancucci told Credit Union Journal. "While $1.2 or $1.3 trillion still amounts to quite a number of mortgage loans, what we'll experience for the next several years is nothing like we became used to during the last decade."
Johnston agreed, saying that while credit unions may be disappointed with their results from focusing on mortgage lending in the short term, the focus will pay off in the end with new younger members and greater walletshare.
"This is a time when [CUs] can be good counselors and build those long-term relationships," he said.
