Thursday, July 09, 2009

Prime borrower delinquencies rising

This could cause higher-priced homes to fall more in value:
Mortgage delinquencies show few signs of slowing down, according to data from an industry-wide coalition of mortgage investors and servicers.

The number of mortgages that were 60 days or more late reached 5.65% in May, which makes for the highest level on record.... Foreclosure starts surged after pausing earlier this year as various states and lenders held back foreclosures through various moratoria. Some 257,000 homes entered the foreclosure process, up 5.7% from April and 34% from one year ago.

The May figures show how the housing market distress has eased for subprime borrowers while it continues to accelerate for prime borrowers. Subprime foreclosure starts fell by 16% from one year ago, even as prime foreclosure starts jumped by 83%. Housing analyst Ivy Zelman notes that an “incremental weakening in prime mortgages are likely to result in a pick-up in higher-priced foreclosures hitting the market in late 2009/early 2010.” That could put more downward pressure on the higher end of the housing market.
According to the Chicago Tribune, the surge in foreclosures is likely to continue pushing prices down:
Just as the nation's housing market has begun showing signs of stabilizing, another wave of foreclosures is poised to strike, possibly as early as this summer, inflicting new punishment on families, communities and the still-troubled national economy.

Amid rising unemployment and falling home prices, mortgage loan defaults have surged to record levels this year. Until recently, many banks have put off launching foreclosure action on many troubled properties, in part because they had signed up for the home-stability plan from President Barack Obama's administration, which required them to consider the alternative of modifying loans to make it easier for borrowers to make payments.

But with many government and self-imposed foreclosure moratoriums expiring, the biggest lenders indicate they are likely to move more aggressively to clear a backlog of troubled mortgages.


  1. This doesn't surprise me. Also, we haven't seen that many Alt-A mortgages reset yet, and these also tend to be higher priced properties (at least higher than subprime, which tend to be lower priced starter homes).

  2. Go anywhere in the US and you will find vacant Mcmansions and overpriced large houses by the thousands. If the banks where forced to liquidate their enormous holdings of vacant properties, that alone would drop their price by at least 35-50%. You can speculate about default rates all you want but the fact that all these homes were built that people can't afford will drive their prices down more than anything else.

  3. "If the banks where forced to liquidate their enormous holdings of vacant properties, that alone would drop their price by at least 35-50%."

    Luckily for the asshats that overextended their credit to buy a home they dont deserve, the banks ARENT forced to do that.

    Thus I will rent another 5-10 years.