Not since the 1930s have we seen housing and unemployment this bad. In addition, 12 million renters face eviction due to no rental payments for at least three months. Wolf Street points out that delinquent mortgages are the highest since 1999.
Transition from “Current” to 30-days past due:
In April, the share of all delinquent mortgages soared to 3.4% of all mortgages. That percent is the highest in the data going back to 1999. This was up from 0.7% in April last year. During the Housing Bust, this rate peaked in November 2008 at 2% (chart via CoreLogic):
From 30 to 59 days past due:
The rate of these early delinquencies soared to 4.2% of all mortgages, the highest in the data going back to 1999. This was up from 1.7% in April last year.
From 60 to 89 days past due:
As of April, this stage had not yet been impacted, with the rate remaining relatively low at 0.7% (up from 0.6% in April last year). This stage will jump in the report to be released a month from now when today’s 30-to-59-day delinquencies that haven’t been cured by then move into this stage.
Serious delinquencies, 90 days or more past due,
including loans in foreclosure: As of April, there is no impact on this stage, and the rate ticked down to 1.2% (from 1.3% in April a year ago). We should see the percentage rise in two months and further out.
Delinquent Mortgages Are the Highest Since 1999
These delinquency rates are the first real impact seen on the housing market by the worst employment crisis in a lifetime, with over 32 million people claiming state or federal unemployment benefits. There is no way – despite rumors to the contrary – that a housing market sails unscathed through that kind of employment crisis.
So far, the government has been fighting evictions and foreclosures by declaring a moratorium on both, but that ran out toward the end of July. President Trump signed executive orders to extend the moratoriums, but some argue that it was a political stunt.
At his golf club in Bedminster, N.J., Trump announced he was postponing payroll taxes through the end of the year, extending the unemployment “bonus” at $400 a week (down from $600), helping people “stay in their homes” and waiving student debt payments through the end of 2020. The details, however, are not as generous as he made them sound.
For example, Trump has said many times in recent days he wants to prevent evictions, but his latest executive order does not ban evictions. Instead, Trump calls for Health and Human Services Secretary Alex Azar and Centers for Disease Control and Prevention Director Robert Redfield to “consider” whether an eviction ban is needed.
I suspect we will see the Trump administration do everything it can to delay all foreclosures until after the November election. It wouldn’t be good to see thousands of evictions and the news carrying images of people kicked out of their homes. You now have until 2021 to learn all you can about investing in notes and deeds.