Mortgage defaults should fall further on lower unemployment rate
The mortgage delinquency rate fell to a 12-year low, with declines expected to continue as the unemployment rate stays down, according to CoreLogic.
About 4.1% of mortgages were in some state of delinquency in July, down 0.6 percentage points from 4.7% a year ago. The foreclosure inventory rate also dipped 0.2 percentage points to 0.5% year-over-year in July, and remained unchanged from June.
While at a higher level the delinquency rate is projected to fall further, local conditions may cause opposite results in certain areas.
With the national unemployment rate remaining below 4% since July, further declines in U.S. delinquency rates are likely in coming months," Frank Nothaft, chief economist for CoreLogic, said in a press release.
"The exception will be in local areas impacted by natural hazards or a rise in unemployment. The destruction of homes and disruption to local commerce caused by natural disasters lead to a subsequent spike in local delinquency rates, even for homes that were untouched," he continued.
States targeted by Hurricanes Harvey and Irma last year serve as a prime example for what's in store for areas like the Carolinas, which were hit hard by Hurricane Florence last month. Texas and Florida were the only two states to experience increases in serious delinquency rates in July.
On a national level, the serious delinquency rate decreased to 1.6% from 1.9% year-over-year. This share rose three percentage points in Florida and one percentage point in Texas.
Overall, early-stage delinquencies fell to 1.9% from 2.1% from a year ago.