Rising foreclosure rate restrains housing starts
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Both the delinquency rate (30+ days late) and the number of residential mortgages in foreclosure jumped sharply in the 1st quarter according to the Mortgage Bankers Association national delinquency survey. The survey results are available at http://www.mbaa.org/newsandmedia/presscenter/69031.htm. 1.37% of residential mortgages entered the foreclosure process in the 1st quarter, up from 1.08% in the previous quarter. The delinquency rate rose to 6.06% for prime loans and the share of prime mortgages in the foreclosure process jumped to 2.49%.
The prime delinquency rate is far below the rate for sub-prime (24.95%) and FHA loans (13.4%). But most mortgage loans are prime rate so the relatively low – but historically high – prime default rate now dominates the foreclosure count.
Nationally, about one in eight residential mortgages are 30 days or more past due or in the foreclosure process. This does not include mortgages already foreclosed, some of the distress sales to avoid foreclosure or homeowners cutting other spending sharply to cover their mortgages.
The foreclosure problem is far worse in the Southeast and Southwest where subprime loans were more common and hence the depth of the recession is greater. 10.6% of all Florida mortgages were in the foreclosure process in the 1st quarter. The rate was 7.8% in Nevada, 5.6% in Arizona and 5.2% in California. The price decline is not over in these housing markets. Nonetheless, existing home sales will keep rising in these markets as first time buyers and speculators buy homes at a once in a lifetime bargain price. Within the last two weeks, I got emails announcing 10-20% price cuts on more than 10% of home prices I am following in a Florida Gulf Coast community.
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