Bubble Watch: 5.5% of mortgages in California are delinquent

“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: An estimated 5.5% of all first mortgages in California were delinquent in July.

Source: Black Knight’s tally of skipped mortgage payments counts all homeowners tardy on payments whether they are in forbearance plans or not.

The Trend

California delinquencies have risen from 1.8% in February. Yes, they’ve tripled in a period of unprecedented economic volatility due to business limitations amid the coronavirus pandemic. It’s an upswing that translates to 277,000 more late-payers than before the pandemic struck.

Still, California’s delinquency rate is below the national average of 6.9%. The U.S. slow-pay rate was 3.3% five months earlier.

The Dissection

A big economic challenge amid the pandemic has been estimating how many folks who lost various forms of income would make their house payments.

Well, California could be in a mess like Mississippi (11.8% of mortgages delinquent) or Louisiana (10.8% late). So, we can be thankful that tardy first mortgages are worse in 36 states.

Let’s note that 3.5%, a big chunk of California’s unpaid mortgages, are “seriously delinquent” — 90 days or more late. The only good news here: It’s a rate that is also below the national rate of 4.1% for seriously late mortgages.

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … THREE BUBBLES!

Yes, forbearance programs look generous, perhaps even so generous some folks are skipping payments because of the terms. Users pay back the money at the end of the loans and supposedly suffer no reports of tardiness to credit bureaus.

Various foreclosure moratoriums have, to date, kept bank repossessions at bay. How long that will last is a grand question.

Black Knight also noted that new delinquencies – borrowers who’ve missed just one payment – are falling nationally, “suggesting that the initial inflow of new COVID-19-related delinquencies has subsided.”

Still, it’s unnerving to have that many folks not paying. It’s not extreme heights of the bubble-bursting days surrounding the Great Recession. But this is not some mere blip to be ignored. 

Source link