The golden children of the housing boom have become the downturn’s juvenile delinquents—or worse. Driven primarily by ever-worsening situations in California and Florida, the seasonally adjusted mortgage delinquency rate for all outstanding loans rose to 6.35 percent in the first quarter of 2008.
It is the highest such figure recorded by the Mortgage Bankers Association, which has tracked such data since 1973. The group’s quarterly survey found other trouble spots as well: The rate of loans entering foreclosure (0.99) and the percentage of loans in foreclosure (2.47 percent) also hit the highest levels since 1979.
The reason? The two most-populous states in the country, which are suffering an intense housing downturn due to their relative size and their now-slumping housing markets. “The problems in California and Florida are extraordinary, and they are the main drivers of the national trend, noted Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association.For example, in 2008’s first quarter, California accounted for 13 percent of all mortgages outstanding, but 21 percent of the foreclosure starts, which are loans entering the foreclosure process. Florida represented 8 percent of all loans, but 15 percent of foreclosure starts.
Certain loan types are also exerting disproportionate pressure on delinquency and foreclosure rates. According to the Mortgage Bankers Association survey, subprime adjustable rate mortgages (ARMs) were just 6 percent of all mortgages, but 39 percent of all foreclosure starts in 2008’s first quarter. (In contrast, prime fixed rate mortgages represented 65 percent of all home loans, but only 19 percent of new foreclosure starts.)
And, unfortunately for builders and recent new-home buyers, many of the most intractable delinquency and foreclosure problems appear to be happening in newer subdivisions, Brinkmann said during a conference call this morning with reporters. The vacancy rate for homes built before 2000 stands at 2 percent, he noted, while that figure is 10 percent for homes built after 2000. He suggested that big home price declines in such areas as well as difficulty in working out situations with borrowers have resulted in that higher vacancy rate for new homes.
Alison Rice is senior editor, online, for BUILDER magazine.
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