Moody's reported that the rate of defaults on home mortgages has fallen to roughly 6.5% of all mortgages, and that the number will be slightly lower throughout 2010. They neglected to mention that the historical default rate is one-third that, or that the 2010 default rate on mortgages will be 300% higher than the historical rate.
Housing sales in 2010 will be worse than expected, and home prices will continue to fall as more and more foreclosed homes enter the market. There are currently more than 800,000 foreclosed houses that the banks have yet to put on the market, and another 1.5 million homes are expected to go into foreclosure in the next 18 months.
Lesson for investors in 2010: Don't bet on a housing market recovery next year. And realize that this sector will create a great shorting opportunity.
Next: Lie #6: The Credit Crunch Is Easing