Late house payments aren't widespread -- yet
Mortgage rates are rising, home prices are stalling
in parts of the country, lots of people are taking out alternative
home loans that barely existed five years ago and inflation seems
to be picking up.
Guess which of the following scenarios is happening
A. They are falling behind in
their mortgage payments. The delinquency rate -- in other
words, the proportion of homeowners who are at least 30 days past
due on their house payments -- is skyrocketing. Foreclosures are
going up, too, but not as rapidly.
B. Homeowners actually are making
fewer late payments than they were at the end of 2005. They're
making more late payments than a year ago, but only because of Hurricane
The correct answer is B, according to the Mortgage
Bankers Association. The proportion of homeowners making late payments
fell in the first three months of this year, compared to the last
three months of 2005. The foreclosure rate dropped a teensy bit.
Welcome to Housing Market, U.S.A.
To visualize what's happening, imagine a town that represents the
U.S. housing market. The town has exactly 10,000 owner-occupied
homes with mortgages. In the first three months of this year, 441
of those homeowners were at least 30 days past due on their house
payments, compared to 470 homeowners in the last three months of
2005. In other words, the delinquency rate fell to 4.41 percent
from 4.7 percent.
In the same town, 98 homes were somewhere in the
foreclosure process in the first three months of 2006, compared
to 99 homes in similar straits in the final quarter of 2005. The
foreclosure inventory fell to 0.98 percent from 0.99 percent.
In the unlikely event that you had been pondering
delinquencies and foreclosures, you probably didn't think they were
declining in number. A lot of news coverage has speculated that
the combination of rising interest rates, alternative loans and
falling home prices could force homeowners into foreclosure. But
spikes in delinquencies and foreclosures haven't happened. Don't
congratulate yourselves too much, America -- this isn't a sign that
you've suddenly become more responsible.
||Factors behind the drop in late payments
Jobs combat delinquency
"The most important thing in the performance of the housing
market is employment," says Doug Duncan, chief economist for
the Mortgage Bankers Association. The economy has been creating
jobs in the last couple of years at a rate that "counteracts
things that tend to drive delinquencies up."