The share of mortgages that transitioned from current to 30 days past due increased to 1% in March but remained below the 20-year average of 1.3%.
That’s according to the latest CoreLogic monthly Loan Performance Insights Report, which shows that, for the 17th consecutive month, the U.S. foreclosure rate was the lowest in at least 21 years.
While strong home price and equity growth prior to the COVID-19 pandemic lockdowns has helped to stave off the impact of the recession on the mortgage market, it’s not expected to last.
The report echoed CoreLogic’s earlier prediction that home prices will see their first declines in nine years by 2021. But for now at least, the overall delinquency rate, which includes homes in foreclosure, is actually down 0.4% from March 2019.
However, those numbers don’t reflect what happened in April, as lockdowns across the country led to record unemployment levels not seen since the Great Depression. Now that the country has officially entered a recession, the likelihood of borrowers falling behind on their mortgage payments is expected to rise, which will in turn affect prices.
“The COVID-19 pandemic has shocked our economic system and led to unprecedented job loss, reducing the ability of affected families to make their monthly mortgage payments,” said CoreLogic Chief Economist Dr. Frank Nothaft in a press release. “The latest forecast from the CoreLogic Home Price Index shows prices declining in 41 states through April 2021, potentially erasing home equity and increasing foreclosure risk.”
In Chicago, 4.1% of mortgages were late 30 days or more in March, down 0.6% year over year.
“The first three months of 2020 reflected one of the strongest quarters for U.S. mortgage performance in recent history,” said CoreLogic President and CEO Frank Martell. “The build-up in home equity over the past several years, government stimulus programs, and lower borrowing costs have helped cushion homeowners from the initial financial shock of the pandemic and kept widespread delinquencies at bay during the first months of the recession.”
The July CoreLogic Loan Performance Insights Report, which will reflect April data, is expected to paint a different picture.
“Looking ahead, we can expect a more widespread impact on U.S. delinquency rates as the economic toll of elevated unemployment and shelter-in-place orders becomes more evident,” Martell added.