Foreclosure rates hit 12-year low, but impact of wildfires not yet felt
The mortgage delinquency rate dropped on an annual basis, a sign of a strengthening economy, but could soon see a spike due to this year's wildfires, according to CoreLogic's Loan Performance Insights Report.
In May, the foreclosure inventory rate reached 0.5%, its lowest depth for any month since September 2006. Foreclosure rates dipped 0.2 percentage points from last year.
The share of mortgages that transitioned from current to 30 days past due was 0.8% in May 2018, the same from a year before. Early-stage delinquencies (30-59 days past due) are a harbinger for the state of the mortgage market. The rate of early-stage delinquencies also dropped, going to 1.8% from 1.9% in May 2017.
The overall mortgage delinquency rate — mortgages in any stage of delinquency — in the U.S. sat at 4.2%, marking a year-over-year decline of 0.3 percentage points.
"While the strong economy has nudged serious delinquency rates to their lowest level in 12 years, areas hit by natural disasters have had increases," Frank Nothaft, chief economist for CoreLogic, said in a press release.
The impact of the wildfires that roiled through parts of California, Montana and Arizona, probably hasn't been felt yet. "The tragic wildfires in the West will likely lead to a spike in delinquencies in hard-hit neighborhoods," Nothaft continued.
"The wildfire in Santa Rosa last year destroyed or severely damaged more than 5,000 homes. Delinquency rates rose in the aftermath, and in the ensuing months we observed home-price growth accelerate and sales decline. We will likely see the same scenario unfold in fire-ravaged communities this year," he added.
Of course, hurricanes are another natural disaster that doubles as a major cause of housing damage and late mortgage payments. The states in harm's way deal most with the fallout.
"Serious delinquency rates continue to remain lower than a year earlier except in Florida and Texas, the hardest-hit states during last year's hurricane season," Frank Martell, president and CEO of CoreLogic, said in the same press release. "We have observed continued challenges for families to make mortgage payments in regions impacted during the 2017 hurricane season."