Lower mortgage delinquency rates may be signaling a stronger housing market for the remainder of 2017 and into 2018, as the U.S. economy continues to improve.
Mortgage delinquency rates are at a 17-year low, according to a report from the Mortgage Bankers Association’s (MBA) National Delinquency Survey. Conventional delinquency rates fell from 4.04% to 3.47% in the second quarter of 2017, which is the lowest since 2005. In fact, mortgage delinquencies on a whole dropped, including conventional mortgages, FHA mortgages, and VA mortgages.
Meaning of Lower Mortgage Delinquency Rates
The mortgage delinquency rate shows that Americans are better able to pay their mortgages in 2017 than at any other point since 2000, which includes the housing crisis.
July 2017 had the lowest number of loans in foreclosure when compared to any month within the last 10 years, and possibly longer. Furthermore, the FHA delinquency rate reached its lowest level since 1996 at 7.94 percent, and the VA delinquency rate dropped to its lowest level since 1979 at 3.72 percent.
According to a statement from Marina Walsh, MBA’s vice president of industry analysis, this past quarter also saw the foreclosure inventory rate at the lowest level since Q1 2007. She said:
“In the second quarter of 2017, the overall delinquency rate was at its lowest level since the second quarter of 2000. The foreclosure inventory rate was at its lowest level since the first quarter of 2007. In addition, the seriously delinquent rate, which combines loans that are 90 days or more past due with those loans in the process of foreclosure, dropped to a ten-year low.”
As for the future of the housing market, declining mortgage delinquency rates show that the U.S. economy is improving overall, which should continue to support a strong housing market. Furthermore, low rates of mortgage delinquencies indicate that short sales and foreclosures will remain low for the immediate future.
Seriously Delinquent Mortgages
When examining seriously delinquent mortgages, which are 90 days or more past due, the delinquency rate dropped to a ten-year low as well. In Q2, the rate was 2.49 percent, 27 basis points lower than Q1 of 2017, and 62 basis points lower than Q2 of 2016.
Cause of Low Delinquency Rates
Why are delinquency rates so low?
According to Marina Walsh, “The employment outlook continues to support loan performance. Monthly job growth topped 200,000 jobs in June for the fourth time in the first six months of the year. Job growth in the month of July also topped 200,000. Possible factors that could influence a directional change include rising loan-to-value and debt-to-income ratios for certain product types, as affordability is stretched by tight inventory and rising home prices, and normal loan aging.”
Read MBA’s press release: Delinquencies and Foreclosures Continue to Decline in Q2 2017
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