Strict mortgage underwriting standards, a high foreclosure rate, elevated inventories of unsold homes, and slow job growth are "standing in the way of a clear turn in the housing market," according to Atlanta Federal Reserve Bank president Dennis Lockhart.
Lockhart, in a speech written for an Atlanta Rotary Club luncheon, predicted that home building may increase in 2011 and contribute to economic growth for the first time in five years, but said the rest of the housing market has problems. (The speech was slated for Monday but the event was cancelled due to snow.)
He noted there are currently 5 million mortgages that are considered seriously delinquent or in some stage of foreclosure. He said nearly all of these properties may enter the market as distressed sales in the next year or two, putting downward pressure on prices.
"The direction of home prices will depend to a large degree on the future flow of foreclosures," he predicted.
Despite headwinds, Lockhart expects economic growth will be better in 2011 than last year and may "surprise" on the upside. "I think the stage is set for some credit expansion in 2011," he said.
