Continuing mortgage meltdown

The tsunami of defaults and foreclosures continue to sweep across of the American real estate market. Those investors who jumped back into the market are about to get screwed.

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 10.06 percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 106 basis points from 10.44 percent in the fourth quarter of 2009 to 9.38 percent this quarter.
The percentage of loans on which foreclosure actions were started during the first quarter was 1.23 percent, up three basis points from last quarter but down 14 basis points from one year ago.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 4.63 percent, an increase of five basis points from the fourth quarter of 2009 and 78 basis points from one year ago. This represents another record high.

With the end of the home buyer tax credit program, this is only going to get worse. Mortgage applications are dropping off a cliff.

The Refinance Index increased 14.5 percent from the previous week and the seasonally adjusted Purchase Index decreased 27.1 percent from one week earlier. This is the lowest Purchase Index observed in the survey since May of 1997....
“Purchase applications plummeted 27 percent last week and have declined almost 20 percent over the past month, despite relatively low interest rates. The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season.

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did you read MBA's press release?

located here. It's an exercise in "we don't know what this really means" and it's all due to seasonal vs. not seasonal adjustments. The 10.06% is seasonally adjusted. Not seasonally adjusted is 9.38%.

Caution regarding seasonally adjusted numbers

“The issue this quarter is that the seasonally adjusted delinquency rates went up while the unadjusted rates went down. Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter and we saw that first quarter drop in the data. The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement. Most importantly, the normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which,” said Jay Brinkmann, MBA’s chief economist.

“The seasonal models say it is not a fundamental improvement and that the seasonal drop should have been larger to represent a true improvement, hence the increase in the seasonally adjusted numbers. Yet there is reason to believe the seasonally adjusted numbers could be too high. Simply put, fundamental market factors may be having a greater influence on the delinquency rates than is normally the case, but mathematical models have difficulty discerning the difference over a short period of time.

“Since discerning what represents a fundamental improvement versus a simply seasonal improvement is probably more of an art than a mathematical science at this point, the seasonally adjusted numbers should be viewed with a degree of caution.

ok....uh, the seasonal models say delinquencies are at an all time high, so now magically the seasonal adjustment models are not accurate? Which is it?

Calculated Risk is really digging and it appears he isn't buying it.

To me, Calculated Risk is the uber housing market stat site, so he graphed out the data and whether you've got a seasonal anomaly or not, this does not look good. Also listed is the shadow inventory.

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