Given all that gloom and doom, you would think that homeowners' financial challenges would be visible in their payment performances on their mortgages. With such household debts, you would think that growing numbers of borrowers might be falling behind, paying their mortgage lenders late and maybe even sliding toward foreclosure.
But the reverse is true: Late payments on home mortgages were actually lower in mid-2005 than they were at the same time the year before -- 4.3 percent of all homeowners were at least slightly behind on their payments this year vs. 4.6 percent last year. Foreclosure rates are low and continue to fall. In mid-2005, 1 percent of all outstanding mortgages were in foreclosure, compared with 1.2 percent in mid-2004.
That seems solid. However, perhaps the reason that foreclosures are at a lower rate this year then last is because there are now more markets with strong price appreciation. The people in the high price appreciation areas are more likely to sell if they fall behind on payments. "The next-lowest late-payment rate was in California (1 percent), followed by Virginia (1.3 percent). Everybody knows about California home costs and affordability problems. Plus, its 25.2 percent average appreciation rate last year ranked it fourth in the country. Virginia real estate is less expensive than in California and Hawaii but still well above the national average. And its 20.9 percent appreciation rate last year ranked it the eighth-fastest-inflating state."
Where are foreclosure rates the highest? Nationwide, the rate was 1 percent at mid-year. But several states are experiencing foreclosures at two to three times that rate. Ohio had the highest incidence -- 3.3 percent of all loans outstanding were in or beginning the foreclosure process. Next were Indiana (2.8 percent), Kentucky (1.9 percent) and Mississippi (1.7 percent).
Also, "foreclosure rates in general are lower in 2005 than they have been in previous decades in part because Fannie Mae, Freddie Mac, the Federal Housing Administration and most major lenders all now use sophisticated "loss mitigation" techniques to keep even the most seriously delinquent borrowers in their homes. The techniques include restructuring loan terms, deferring late balances to the end of the loan and sometimes even lowering interest rates."
Debt repayment is being delayed. For many Americans, it is a thin veneer of wealth. Underneath, is a cheaply constructed particle board lifestyle that was manufactured in China.