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Foreclosures and Underwater Mortgages Lowest in Years

As the title states, this is a very positive sign! Couple that with the Unemployment Rate at a 49 year low & things are looking up!   

via Forbes


Foreclosures And Underwater Mortgages Fall To Lowest Rate In Years

Getting a mortgage might be more expensive these days, but for those who already have one? It seems staying current on those loans is now easier than ever.

According to new data from CoreLogic, October saw the country’s lowest overall delinquency rate — the share of total mortgage borrowers behind on their mortgage — since 2001.

Only 4.1% of mortgages were in some stage of delinquency (including foreclosure) for the month, down from 5.1% in October 2017. Foreclosure inventory was also down, hitting its lowest point since September 2006, just before the housing crash.

This chart shows the number of foreclosures and mortgage delinquencies compared to 2017.


Frank Nothaft, CoreLogic’s chief economist, attributes these low delinquency levels to a perfect storm of factors: low unemployment, rising home prices and good underwriting practices.

In Q3 2018, unemployment was at a 49-year low, and average American wages were up 3.5% over the year. Home prices, according to CoreLogic’s Home Price Index, were up 5.8% since March 2011, when prices bottomed out.

“Job and income growth provides families the financial resources to remain current on their mortgage payments, and price growth builds home-equity wealth, lowering the current loan-to-value ratio,” Nothaft said.

Couple this with the more stringent underwriting standards that came out of the housing crisis, and mortgage borrowers are just in a better position to stay current on their loans.

core based.jpg

The chart shows foreclosure and delinquency rates in the nation's top 10 metros.COURTESY OF CORELOGIC, A PROPERTY DATA AND ANALYTICS COMPANY.

Every state saw a drop in delinquency rates over the year, with the exception of North Dakota, where rates held steady from 2017. At the metro-level, nine out of 10 of the country’s biggest cities have foreclosure rates under 1%. In Denver and San Francisco, it’s a mere 0.1%.

Not every market has seen delinquencies dip, though. In fact, in areas where natural disasters have hit -- like Panama City, Florida (which was hit by Hurricane Michael in early October), delinquency rates are on a tear. The city saw 30-day mortgage delinquencies triple in the two months following the event.

Carolina cities hit by Hurricane Florence, including Jacksonville, Wilmington, New Bern and Myrtle Beach, as well as cities impacted by the recent eruption of Mt. Kilauea on Hawaii’s Big Island, are also seeing a similar effect. Of the 18 metro areas to post an annual jump in mortgage delinquencies, seven were in the Carolinas.

For the rest of the country, though, it appears most markets will continue to see record lows when it comes to foreclosures and underwater mortgages —especially if the economy remains strong.

“I expect that the U.S. will continue to see a gradual decline in delinquency rates during 2019,” Nothaft said. “ We expect economic growth to continue, pushing the unemployment rate lower and raising income”

Nothaft also predicts home prices to continue rising — jumping 4.8% over the year. A smaller jump than the one seen in 2018, but a jump nonetheless.

Tendayi Kapfidze, chief economist for LendingTree, also expects delinquencies to remain low this year, thanks to a healthy job market.

“The labor market is strong, lending standards in mortgage tightened more than for the other loan types since the recession and home price appreciation has been strong,” he said.

Kapfidze predicts unemployment rates and wage growth will continue on their current trajectories across 2019. Wage growth should reach 3.5% by the end of the year, he said.

Brad Tippett