Late house payments aren't widespread -- yet
The MBA's Duncan says the passage of time adds another
risk factor. People are most likely to default on their mortgages
three to five years after getting the loan. It's now about three-and-a-half
years after the beginning of the refi boom, and Duncan expects delinquencies
and foreclosures to rise modestly over the next few years.
Appreciation holds problems
Why only a modest rise? Because in many parts of the country, home
prices have risen dramatically. In the last five years, average
home values have more than doubled in six states, according to the
Office of Federal Housing Enterprise Oversight, and the national
average shows a 57 percent gain over that time. Price appreciation
gives strapped homeowners the financial room to fix up their homes,
sell them, retire their mortgages, pay real estate commissions and
On the other hand, when house prices are static,
some people can't afford to sell their homes, because the proceeds
from the sale aren't enough to pay off the mortgage and cover commissions
and moving expenses. The states with the most homes in foreclosure
are cursed with slow price appreciation, as well as the loss of
higher-paying manufacturing jobs. That list includes Michigan, Ohio
and Indiana, the three states with the slowest price appreciation
(under 4.25 percent) in the last year, according to the OFHEO.
Finally, any report about mortgage delinquencies
and foreclosures has to take Hurricane Katrina into account. Picture
again that town with 10,000 houses -- that microcosm of the whole country. Nine or 10 of the homeowners are behind on
their payments because of Katrina. Some await insurance settlements;
some are jobless. By Duncan's reckoning, those people would be current
on their mortgages now if Katrina hadn't hit, and the national delinquency
rate would have been 4.31 percent in the first quarter of this year
-- exactly the same rate as the first quarter of 2005.
And if Katrina hadn't happened, the foreclosure rate
would be higher -- 0.99 percent instead of 0.98 percent -- because
forbearance programs protect homeowners who were hammered by the
hurricane. Eventually, some of those people will lose what's left
of their homes to foreclosure.
The hurricane's effect on homeowners can be seen
when you compare
delinquency rates in Louisiana and Mississippi with their northern
neighbors. In the first quarter of 2006, the delinquency rate in
Louisiana was 13.73 percent, and in Arkansas it was 4.37 percent.
In Mississippi, the delinquency rate was 12.86 percent, compared
to 5.67 percent in Tennessee.
To see the percentage of delinquencies in your state,