The number of borrowers who are three or more payments past due on their mortgage is up 55% over pre-pandemic levels, according to new data from mortgage technology and data provider Black Knight. While there were approximately 400,000 serious delinquencies remaining before the pandemic, today there are roughly 640,000, the data shows. And while that sounds very concerning, pros say it’s not what it seems. (You can see the lowest mortgage rates you may qualify for here.)
Indeed, while the Black Knight data indicates the number of serious delinquencies has grown since before the pandemic, that particular figure doesn’t paint a complete picture of what’s happening in the broader housing market, explains Jacob Channel, senior economic analyst at LendingTree.
Though serious delinquencies are up from a few years back, they were very low anyway before the pandemic, data shows. And Black Knight reports they have fallen between 6-12% in each of the past 14 months. When you get into the nitty gritty of this data, you can see that the serious delinquency rate for FHA loans was nearly five times higher than the serious delinquency rate for conventional loans, according to CoreLogic data. “Homeowners with FHA loans are more likely to be low-to-moderate income workers, and the pandemic had a greater impact on those homeowners as compared to those with conventional loans.”
What’s more, the national delinquency rate — which factors in even someone who is delinquent by a single month — fell in April to 2.80%, marking a new record low for the second consecutive month, Black Knight reveals. As CoreLogic concluded in February: “The nation’s overall mortgage delinquency rates have improved significantly over the last year … Declines in local unemployment rates, a rapid rise in home prices and demand for housing have helped reduce the overall delinquency rate.”
And though the number of borrowers with a single payment past due increased 7.9% in April, that was offset by the fact that the number of borrowers who are three or more payments past due fell 8%. What’s more, foreclosure starts — the process of beginning a foreclosure after 120 days of delinquent payments — fell 12% from March.
“The overall mortgage delinquency rate fell to a new record low and not only that, [foreclosure starts] actually fell 12% from February to March, the largest month-over-month decline in 20 years,” says Channel. And foreclosure starts are below pre-pandemic levels, which means that even if a relatively large amount of people are seriously delinquent, many aren’t actively being foreclosed on.
What does this all mean for the housing market?
At the end of the day, despite a few hiccups here and there, most data indicate that the housing market is doing pretty well, pros say. The majority of people seem capable of keeping up with their mortgage payments, and this is what economists and real estate pros told MarketWatch Picks about the housing market now. “While high rates and prices may push some people out of the market and eventually start putting more noticeable downward pressure on demand, there isn’t much evidence to suggest that we’re going to see a lot of homebuyers suddenly start falling behind or defaulting on their loans in the near future,” says Channel.