The North Carolina unemployment rate was reported at a all time high of 11.1% for the month of May.  This is VERY bad news for current home owners.  No matter how resilient the NC housing market seems to be, unemployment is definitely going to have an effect on home prices.  If the unemployment rate stays above 10% for a long period of time, home prices in the state of North Carolina may see losses in excess of 20%.

Overall, most home owners in North Carolina have only seen minimal losses on their homes value.  Both the cities of Raleigh and Charlotte are less than 10% off the housing market top back in July of 2006.  Now that unemployment is hitting hard, we could see these two markets see a drastic decline.  The banking industry in Charlotte and the government jobs in Raleigh have held up these markets, but we will see what happens as unemployment increases.

S&P’s chief economist David Wyss expects “home prices will decline by an additional 5%-7% from the 2006 peak before residential real estate prices start to stabilize in the first half of 2010, marking an overall decline of approximately 37% from the July 2006 peak.”  I would argue that it will be much worse than 5%-7%. Overall, the Case-Shiller housing index is off 33.1% since the top in July of 2006.  Another 5%-7% would mean that the housing market bottom would see a 40% nationwide loss.

The reason that Wyss feels the losses will extend is because of the Alt-A and Subprime mortgages still on the books.  The reason that I think that losses will be even worse than that is the accleration of unemployment WITH a stimulus package.  The stimulus package was expected to slow job losses by the 2nd quarter of 2009.  This obviously has not happened as we still seeing an increase in the national unemployment rate.

As I have stated many times in the past, if Americans do not have jobs and they continue to see an up trending unemployment chart, the economy is not going to get better.  Part of the battle that President Obama is having is the psychology of the overall economy.  Just trying to convince Americans that things are getting better is an uphill battle that he is not winning.  The Obama Refinance plan was an attempt, but that seems to not be working that well either.  There are good reasons why Americans do not believe this, but if there was any positive sentiment, we would likely see “some” improvement.

The worst part is that mortgage rates are likely to rise in the next few weeks which is exactly what the housing market does not need.  No one knows when we will see a bottom in housing, but maybe after average mortgage rates rise and we flush out most of the foreclosures and short sales we might see a bottom.  This will obviously take quite a bit of time, but it needs to happen sooner rather than later.

Thanks to Zillow.com for the chart above that shows just how bad things have gotten in the Phoenix housing market.  The Case-Shiller Index illustrates that Phoenix is down 53% since the July 2006 top.  It will be very interesting to see if higher mortgage rates affect this trend even more.  I would like to hear from anyone in the Phoenix market and please let us know if you have seen any signs of recovery.

Make sure to use Subprime Blogger for your mortgage rates forecast as well as keeping up with mortgage rate trends.

How high will mortgage rates go is a question that almost every home owner is wondering right now.  Over the last three weeks mortgage rates have gone from 4.8% to 5.59%.  Some nationwide mortgage lenders are reporting rates as high as 5.95%.  This is a very scary thought if you were in the refinance process.  It is an even scarier thought if you are planning to buy a house in the next few months.  The difference in a percentage point on a 30 year fixed rate mortgage could be tens of thousands of dollars over the lifetime of the home loan.

Another major area of concern are those trying to get a home loan modification to stay in their homes.  President Obama created the Making Home Affordable plan in an effort to allow everyone access to low mortgage rates.  Well, what if mortgage rates are no longer low?  For those that cannot make their mortgage payments and were hoping to modify to low payments, higher mortgage rates might be the nail in the coffin.  Mortgage lenders and banks will still work with these individuals but there is nothing the financial institutions can do if rates are moving higher.

I personally feel that the fluctuation in mortgage rates is very bad news for the overall housing market.  When mortgage rates were near historical lows, we still did not see a bottom in home prices.  Now that mortgage rates are going higher, home prices are sure to fall even more.  Maybe this is just what we need, a final freefall in home prices that will clear out all the excess supply.  It is a very scary thought, but sometimes its easier to just rip the bandaid off rather than slowly pulling it as we have been for over a year now.

Next week is going to be very hard to make mortgage rate predictions because of this extremely volatile market.  For the sake of home prices and the housing market as a whole, I really hope we find some stabilization and head lower from here.  If rates continue to bounce back and forth, we are going to see lenders doing some very unusual activities as they are going to find it diffcult to find funding for mortgages.

In the CNBC documentary “House of Cards” the staff points out that 9/11 was the primary cause of the subprime mortgage crisis.  “How can this be?” you may ask.  Well, after 9/11 you may remember that NO ONE wanted to leave their home and there was very little consumer spending going on for the entire month of September 2001.  This put a halt to financial markets as there was no money in circulation.  Alan Greenspan knew that if this continued, there would be an economic disaster in the United States.  To combat this issue, he forced interest rates extremely low.  By doing this, he was basically giving Americans a chance to spend money at little to no interest.  It also meant that mortgage rates would fall.

When mortgage rates started to fall many individuals wanted an opportunity to buy a home and live the American dream.  Well, the fact that Fannie Mae and Freddie Mac were not the only companies that could back mortgages anymore, Wall Street got involved.  Almost all the financial firms on Wall Street got involved in the mortgage lending business even if they had no idea what was going on.  The fact that mortgage rates were low and individuals were buying homes left and right made if very alluring to be in the market.  Well, not everyone had the financial background to get a mortgage…..until after 9/11.  The idea of the subprime mortgage was finally marketed to all of America.  I am sure many of you saw late night mortgage commercials saying that “YOU could get a mortgage no matter what your credit score!”  Unfortunately, this is what caused the financial crisis we are currently in.

All of this stemmed from the fact that Alan Greenspan was trying to do the right thing by lower rates after 9/11.  Little did he realize that the disaster he was trying to prevent was going to happen a short six years later.

In July of 2006 we saw the housing market top in the United States.  This chart is a great depiction of the fall we have seen.  I know there were many analysts out there who predicted a housing bubble, but did they ever guess the financial 911 we have seen.  It has definitely been an interesting road that we have taken along the way.  Who can believe that the beginning of the fall of Bear Stearns started exactly two years ago?  There was a great piece by Charlie Gasparino expressing where the Bear Stearns guys are now.  The buying of mortgage backed securities and subsequent decline in home prices sent almost every single Wall Street financial firm into a free fall and we may not recover for a very long time.

I am sure many of you have felt the affects of this on your 401(k) or other personal investments.  The only saving grace that some of you may have is that you had the opportunity to refinance at extremely low mortgage rates.  I am sure this does not make it any easier to swallow the fact that your investments have, most likely, halved themselves.  For anyone who is wondering exactly what happend to cause this disaster, I urge you to watch “House of Cards” a documentary on CNBC.  It explains just how silly these Wall Street firms were and basically points out that 9/11 was one of the major causes of the subprime mortgage crisis.

I promised a rant yesterday and today’s tirade is directed straight at President Obama and Ben Bernanke.  For many months now President Obama has said that credit is the  lifeblood of the economy.  Hmmm, are you sure?  I realize that during most of your lifetime you have seen an abundance of purchases on credit, but hasn’t the current crisis opened your eyes?  The reason we are in the current economic mess is because of credit yet you STILL think credit is the lifeblood of our economy. President Obama, America elected you on your platform of “change.”  Well, as much as things “change,” they stay exactly the same.  You continue to prop up companies that should go backrupt.  You continue to use tax payers money to bail out Wall Street and you are continuing to devalue the United States dollar.  Change?  If I can remember correctly, this was all blamed on the Bush administration.

Ok, ok, maybe it is not all the President’s fault, maybe some of the blame has to go to Fed Chairman Ben Bernanke.  In March, the prophetic (HAHA) Jim Cramer made the statement “In Bernanke I trust” when it was announced that the government was going to purchase over $1 Trillion in mortgage backed securities. Well, of course Jimmy Cramer was happy because he got to refinance his multi-million dollar mansion for a rate under 5%.  This is all find and dandy, but has ANYONE see the housing market recovery since this action?  We all know that mortgage rates dropped dramitcally but it was artificially created by the government’s purchases.  LET THE MARKET SET INTEREST RATES!  Wait, President Obama and Ben Bernanke disagree with free market capitalism, sorry about that!

Peter Schiff has a great interview on the Daily Show that I encourage all of you to watch.  Jim Rogers and Peter Schiff have been right for years and everyone has laughed at them.  Who is laughing now Wall Street?

After many months of an up trending 10 Year Treasury Yield, it looks like mortgage rates are following the treasury notes lead.  Over the past few weeks, the treasury note has surged from 3% to over 3.8%.  This strong uptrend has definitely sent mortgage rates much higher.  Unfortunately, it looks as if the yield is not stopping at 3.8%.  I fully expect the 10 year treasury yield to test 4% before we see any pullback.  This means that rates could hit 5.5% of higher in the very near future.

With rates going up as they are is home loan modification even going to help home owners?  Many home owners have debating refinancing or getting a modification, but if rates are going to continue to uptrend the way they are, there is no point in going through the process if you can’t save at least one basis point on your mortgage rate.  Do you think that the housing market is in great trouble now that mortgage rates are headed higher?

Over the past few months potential first time homebuyers have seen the affordability of the “American Dream” reach an all time high. Several factors are contributing to this opportunity including historically low interest rates, an excess amount of homes on the market, extremely motivated sellers, and an amazing $8,000 tax credit. Not to mention the Fed’s titanic struggle with keeping mortgage rates low. The primary source of a family’s net worth and key toward accumulating personal wealth is homeownership. So why are so many first time homebuyers still waiting to take the first step?

Much like the “Subprime Blogger” himself, I am a firm believer that knowledge is power. With so many readily available resources, how are first time homebuyers not more educated on the tremendous opportunity in front of them?

The media has conditioned us, as Americans, to constantly feel that the worst has yet to come. Our inboxes and internet searches are flooded with sketchy advertisements and promises of interest rates that are too good to be true. Disappearing retirement funds and a stock market that can lose or gain 3% in the blink of an eye, all continually add to the blinders that are permanently affixed to our faces. The first time homebuyer sitting on the fence now is doing so with the feeling that things are going to get even worse. This in terms of mortgage rates and home affordability means that things are going to get even better. Few buyers truly understand that now is the best time in nearly 60 years to buy a home.

Potential buyers must go out of their way to become more educated on today’s housing market. At this point in time, the risk that interest rates will rebound to higher levels truly does outweigh the reward of owning your very first home. Maybe it is time for Americans to get off the fence, or in some cases, get off the couch.

Guest Writers….

For the first seven months of this blog I have opened up the forum to a few readers who had the desire to post their feelings through articles.  After realizing how much passion some of the readers have for the current economic crisis and the mortgage industry, I am going to allow YOU, the reader, to send me articles to post.  The only requirement I demand is that you have PASSION for what you write and it must involve the housing industry.  I would actually prefer you to be strongly opinionated as that is the point of this blog.  If you are interested in writing every once in awhile or every single day please email me at jwojdylo@subprimeblogger.com.  I look forward to posting your articles and getting engaged with the reader.