TransUnion has projected a falling mortgage delinquency rate for the last three quarters of 2012—and that’s great news since default rates are precursors to foreclosures.
They define a mortgage delinquency as a loan 60 or me days past due. While the delinquency rate is anticipated to peak in Q1 2012 at 6.02 percent, they see that falling by 7 percent as the year progresses and could reduce by as much as 16 percent in 2012 versus 2011 depending in the economy. In comparison, from 2006 to 2009 the delinquency rate rose by more than 50 percent each year. This is great news and adds to the progress that real estate is making. But we once again need to invoke the TINSTAANREM clause—There Is No Such Thing As A National Real Estate Market. (In this case it is comparative health of the borrowers). Thirteen locations (12 states and the District of Columbia) are forecast to have escalating delinquencies while 38 should have reductions. Colorado, Wisconsin and Arizona delinquency rates are all expected to drop by more 40 percent. Not surprisingly, four of the five highest delinquency rates were in the hardest-hit housing bubble states of California, Nevada, Arizona and Florida. North Dakota’s rate of 1.47 percent is just slightly greater than a tenth of Florida’s 14.08 percent.
Credit card delinquency rates are even more positive than housing as they reach the lowest level in Q2 2011 reported in 17 years at 0.74 percent. Credit cards are considered delinquent when the payments fall behind at least 90 days. As the economy tightened and consumers reduced their debt, average credit card in the third quarter was $1,000 less than in the second quarter of 2009 at $4,762. Forty locations (39 states and Washington, DC) are forecast to have improving credit card delinquency rates (with Delaware, Oklahoma and California all dropping by more than 20 percent. Double digit percent increases are anticipated in Connecticut (up 14.9 percent), Missouri (12.5 percent) and Louisiana (+10.1 percent). Once again North Dakota has the lowest default rate (0.42 percent). However, just one of the bottom five states in mortgage default rates is included worst five states on credit card defaults.
Note that consumers are much more focused on timely paying their credit cards and auto loans than their mortgages. The auto delinquency rate of 0.47 percent (US average) is a small fraction of the mortgage rate (5.88 percent) even though autos depreciate typically 20 percent per year. You can readily argue more or less decline in auto values but that was the number posited by Money Smarts. Housing prices, on the other hand, are down an average 26 percent from the 2006 peak, but again, that varies dramatically from city to city. Auto loan delinquencies likewise are much lower than mortgages at 0.47 percent. None of the highest mortgage default rate states were included in the highest auto loan default states.
State-by-state data can be viewed at the TransUnion site and are include in the following table.