Sky-high home prices and elevated mortgage rates are putting increasing strain on homeowners. That’s the takeaway from two reports released this week showing that foreclosure activity and mortgage delinquencies are rising.
According to the Mortgage Bankers Association (MBA), the second-quarter 2024 delinquency rate for mortgages on one- to four-unit residential properties increased to 3.97% on a seasonally adjusted basis.
Meanwhile, the July foreclosure report from Attom sends similar signals of rising distress. The company’s data shows that foreclosure filings of all types were up 15% month over month, although they were only 0.2% higher relative to July 2023.
This pipeline of data suggests that more U.S. homeowners are struggling to stay in their homes, and market conditions theoretically put the most heat on those who bought after mortgage rates rose.
The MBA reported that mortgages in all stages of delinquency rose by 3 basis points (bps) on a quarterly basis but were 60 bps higher compared to Q2 2023. On an annualized basis, late-payment rates increased 35 bps for conventional loans, 165 bps for Federal Housing Administration (FHA) loans and 93 bps for U.S. Department of Veterans Affairs (VA) loans.
“Mortgage delinquencies increased across all product types compared to this time last year,” Marina Walsh, MBA’s vice president of industry analysis, said in a statement. “While delinquencies are still low by historical standards, the recent increase corresponds with a rising unemployment rate, which has historically been closely correlated with mortgage performance.”
On the foreclosure side, lender repossessions through completed foreclosures were up 14% in July relative to June but down 2% year over year.
“July’s foreclosure activity reflects a slight shift in the housing market,“ Attom CEO Rob Barber said in a statement. “These shifts may highlight growing pressures in certain areas. However, soaring home prices seem to continue and have spiked the value of homes across the nation, which boosts equity for homeowners at virtually every stage of paying off mortgages. Monitoring these next few months will help us better understand the implications for the real estate sector.“
Geographically, there’s divergence between mortgage delinquency and foreclosure activity.
The states with the largest quarterly jumps in delinquency rates were mainly those in the South with comparatively cheaper housing costs. Mississippi (up 58 bps), Louisiana (+54), Indiana (+53), Ohio (+53) and West Virginia (+52) led the nation.
But the highest levels of completed foreclosures are in states that tend to have the highest housing costs. They are led by Delaware (where one in every 2,214 housing units had a foreclosure filing last month), Nevada (one in 2,245 units); Utah (one in 2,289), New Jersey (one in 2,607) and Illinois (one in 2,660).
