Homeowners With Equity to Lose More Likely to Pay on Time

Increasing home prices have the additional benefit of reducing mortgage foreclosures according to CoreLogic.  The company's Loan Performance Insights report for December notes the 30+ day delinquency rate is at a 10-year low.  Frank Nothaft, CoreLogic's chief economist says "Our latest home equity report found that the average homeowner saw a $9,700 increase in their equity during 2018. With additional 'skin in the game,' rising equity reduces the chances of a foreclosure, helping to push the foreclosure rate down to its lowest level since at least 2000."

The national delinquency rate was 4.1 percent in December, down from 5.3 percent in December 2017. the foreclosure inventory, loans in the process of foreclosure, has declined by 0.2 point to 0.4 percent. Later stage delinquency buckets have all shrunk as well. The degree of year-over-year improvement is shown in the chart below.

Serious delinquencies, defined as loans 90 or more days past due or in foreclosure, decreased in all states except North Dakota where they remained the same. There were 12 Core Based Statistical Areas (CBSAs)/Metros where the Serious Delinquency Rate increased and 12 where it remained the same while the rate decreased in all remaining areas.

Even with the national delinquency rate at pre-housing crisis levels, there are several metropolitan areas in Florida, Georgia, and North Carolina with elevated rates as they struggle to recover from 2018 hurricanes.  Ten of the 12 metropolitan areas where delinquencies increased in December were located in the Southeast. 

According to CoreLogic President and CEO Frank Martell, "On a national basis, income and home-price growth continue to support strong loan performance. Although things look good across most of the nation, areas that were impacted by hurricanes and other natural hazards are experiencing a sharp increase in the numbers of mortgages moving into 60-day delinquency or worse. One specific example is Panama City, Florida, which was devastated by Hurricane Michael, where 60-day delinquencies rose to 3.5 percent in December."

Other hurricane-impacted areas included Wilmington, Jacksonville, and New Bern, North Carolina and Albany, Georgia.  All saw their 30-day rates rise by 0.6 to 0.9 percentage point from the previous December while Panama City's was 1.2 point higher.

CoreLogic also monitors transition rates that indicate the percent of mortgages moving from one stage of delinquency to the next. The share of mortgages that transitioned from current to 30-days past due was 0.9 percent in December 2018, down from 1.2 percentage point in December 2017. By comparison, in January 2007, just before the start of the financial crisis, the current-to-30-day transition rate was 1.2 percent and peaked in November 2008 at 2 percent.