The mortgage delinquency rate dipped to a 12-year low, but overvalued housing markets and eventual reversal in the unemployment rate present risk for future delinquencies, according to CoreLogic.
About 4% of mortgages reached or maintained a state of delinquency or foreclosure in August, a drop off from 4.6% year-over-year and a
"Declines in delinquency rates are good news for America's homeowners and mortgage lenders," Frank Martell, president and CEO of CoreLogic, said in a press release.
"However, risks that create loan default like natural disasters, overvalued markets and an eventual rise in unemployment remain in the market. CoreLogic Market Conditions Indicator data has identified more than one-third of metropolitan areas are overvalued, putting them at risk of price declines and rising delinquencies if local job losses should occur," Martell continued.
For now though, delinquencies are projected to carry on the downward trend. The serious delinquency rate decreased to 1.5% from 1.9% year-over-year. It marks the lowest August since 1.4% in 2006 and matched the lowest of any month since March 2007. Early-stage delinquencies also fell, going to 1.8% from 2% year-over-year.
"With home-price growth building owners' equity, and the low national unemployment rate providing opportunities for income growth, further declines in U.S. delinquency and foreclosure rates are likely in coming months," said Frank Nothaft, chief economist for CoreLogic.
"The CoreLogic Home Price Index for the U.S. recorded 5.7% annual growth in August. This price gain helped the average homeowner build about $16,000 in equity during the prior year and reduces the likelihood of a borrower transitioning from delinquency to foreclosure," Nothaft said.
