The chart shows the total percent of delinquent loans by commercial banks in the USA.
The first half of 2010 saw residential real estate delinquencies continue to increase and other consumer loan delinquencies decreasing (both trends continue those of the last half of 2009). Residential real estate delinquencies increased 118 basis points to 11.4%. Commercial real estate delinquencies increased just 7 basis points to 8.79%. Agricultural loan delinquencies also increased (25 basis points) though to just 3.35%. Consumer loan delinquencies decreased, with credit card delinquencies down 131 basis points to 5.01% and other consumer loan delinquencies down 15 basis points to 3.34%.
Related: Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Bond Rates Remain Low, Little Change in Late 2009 – Government Debt as Percentage of GDP 1990-2008 – USA, Japan, Germany… -posts with charts showing economic data
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30 year fixed mortgage rates have declined sharply recently to close to 4.5%.
If you are considering refinancing a mortgage now may well be a very good time. If you are not, you maybe should consider it. If so look to shorten the length. If you originally took out a 30 year mortgage and now have, for example, 24 years let, don’t add 6 years to your repayment term by getting a new 30 year mortgage. Instead, look to shorten your pay back period with a 20 year mortgage. The 20 year mortgage will have an even lower rate than the 30 year mortgage.
If you plan on staying in the house, a fixed rate mortgage is definitely the better option, in my opinion. If you are going to move (and sell your hose) in a few years, an adjustable rate mortgage may make sense, but I would learn toward a fixed rate mortgage unless you are absolutely sure (because situations can change and you may decide you want to stay).
The poor economy, unemployment rate still at 9.5%, has the Fed continuing massive intervention into the economy. The Fed is keeping the fed funds rate at close to 0%.
If you are looking at a new real estate purchase, financing a 30 year mortgage sure is attractive at rates under to 4.5%.
Related: historical comparison of 30 year fixed mortgage rates and the federal funds rate – 30 Year Fixed Mortgage Rates Remain Low (Dec 2009) – Lowest 30 Year Fixed Mortgage Rates in 37 Years – What are mortgage definitions
For more data, see graphs of the federal funds rate versus mortgage rates for 1980-1999. Source data: federal funds rates – 30 year mortgage rates
Renter Nation by Gene Epstein
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Demographics also will deal home sellers and builders a clear blow. Not surprisingly, the home-ownership rate tends to rise with age. For example, while the overall U.S. rate is 67.2%, the rate for households headed by someone under 35 is just 38.9%.
Thus, whenever the age distribution of households tilts in favor of younger adults, the overall home-ownership rate declines.
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Largely because the echo boomers are more numerous than the baby busters, there are now more U.S. residents aged 15 to 29 than 30 to 44. So five years from now, the nation will have more 20-to-34-year-olds than 35-to-49-year-olds.
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Dallas-based Axiometrics tracks monthly price and occupancy data on apartments in 305 markets around the country. Its research chief, Jay Denton, reports that, on new leases written through this year’s first six months, effective rents—those after all concessions are taken into account—rose a robust 3.2%, after declining through 2009 and much of 2008. And occupancy growth, adds Denton, is close to the best he’s seen in the past 13 years.
Related: articles on real estate investing – Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Apartment-vacancy Rate is 7.8%, a 23-year High (Nov 2009)
Apartment Rentals Surge in U.S. on Foreclosures, Jobs
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The Bloomberg REIT Apartment Index has gained 28 percent this year, double the 14 percent advance in the broader Bloomberg REIT Index.
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Finances for homeowners didn’t improve fast enough to prevent more than 1.65 million foreclosure filings in the first half, an increase of 8 percent from the same period in 2009, RealtyTrac Inc., a data company in Irvine, California, said July 15. A record 269,962 U.S. homes were seized from delinquent owners in the second quarter as lenders set a pace to claim more than 1 million properties by the end of 2010.
The U.S. homeownership rate fell to 66.9 percent in the second quarter, the lowest since 1999, the U.S. Census Bureau said today. The rate peaked at 69.2 percent in the fourth quarter of 2004.
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Effective rents, or what tenants pay after concessions or breaks from landlords, increased 1.4 percent in the biggest markets in the first half, according to MPF Research. Rents may rise 4 percent to 6 percent in both 2011 and 2012, compared with a gain of about 2 percent this year, Willett said.
Rentals are picking up partially due to the economy picking up allowing some who moved into their parents house to move back out. Also the continued numbers of people losing their houses increases the ranks of potential renters. The market is still absorbing many people reducing their housing footprint (people joining up with others to save on expenses). This is one of several important areas to watch (job growth is still probably the most important). As large numbers of apartment are rented and houses are rented or bought it is a strong indicator people are gaining some financial stability.
Related: Apartment Rents Rise, Slightly, for First Time in 5 Quarters (April 2010) – Apartment-vacancy Rate is 7.8%, a 23-year High (Nov 2009) – Sales of New Homes Plunged in USA in May to Record Low
Apartment Rents Rise as Sector Stabilizes
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enters are also staying put longer: the average renter now stays for 19 months, up from an average of 14 months, said Mr. Friedman, and despite low mortgage rates and greater home affordability, fewer renters are leaving to buy homes. “This is the first time in many, many years that it feels like even people who could afford to buy are making the investment decision not to,” Mr. Friedman said.
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Portland, Ore., posted the largest rent decline, at 0.7%, followed by Las Vegas, San Diego, and Southern California’s Inland Empire. Those three markets have all seen an uptick in home-buying activity, particularly among the low end from first-time buyers and investors.
Colorado Springs had the largest rent increases, 2.5%, followed by Washington DC, 2% and San Antonio 1.5%. There is a very nice new online tool, Padmapper, for renters or landlords. It is a mashup on Google Maps of rental listings by location from Craigslist and other sources. Very good search options. Easy to use. Find more real estate links on the Curious Cat Cool Connections Directory.
Related: It’s Now a Renter’s Market (April 2009) – Housing Rents Falling in the USA (February 2009) – Apartment-vacancy Rate is 7.8%, a 23-year High
The chart shows the total percent of delinquent loans by commercial banks in the USA.
That last half of 2009 saw real estate delinquencies continue to increase. Residential real estate delinquencies increased 143 basis points to 10.14% and commercial real estate delinquencies in 98 basis points to 8.81%. Agricultural loan delinquencies also increased (112 basis points) though to just 3.24%. Consumer loan delinquencies decreased with credit card delinquencies down 18 basis points to 6.4% and other consumer loan delinquencies down 19 basis points to 3.49%.
Related: Loan Delinquency Rates Increased Dramatically in the 2nd Quarter – Bond Rates Remain Low, Little Change in Late 2009 – Government Debt as Percentage of GDP 1990-2008 – USA, Japan, Germany… - posts with charts showing economic data
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Half of Commercial Mortgages to Be Underwater
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We now have 2,988 banks – mostly midsized, that have these dangerous concentrations in commercial real estate lending.” As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normalcy in 2010.
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Warren said it’s time for the government to “pull the plug” on mortgage lenders Fannie Mae and Freddie Mac. “I’m one of those people who never liked public-private partnership to begin with. I think what they did was use public when public was useful and private when private was useful,” she said. “And I think we’ve got to rethink that whole thing.”
“There is no implicit guarantee anymore,” she added. “I don’t care how big you are, if you make serious enough mistakes, then your business can be entirely wiped out.”
Financially literate people should know that the current commercial real estate market is in serious trouble. I still figure it will rebound well. I just want to wait and see how far prices fall and then try to buy when people are so frustrated they will sell at very low prices.
Related: Commercial Real Estate Market Prospects Remain Dim – Mortgage Delinquencies and Foreclosures Data Indicates 2010 Could Show Improvement – Jumbo Loan Defaults Rise at Fast Pace (Feb 2009)
The delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 9.5% of all loans outstanding as of the end of the fourth quarter of 2009, down 17 basis points from the third quarter of 2009, and up 159 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 50 basis points from 9.9% in the third quarter of 2009 to 10.4% this quarter.
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 fourth quarter was 4.6%, an increase of 11 basis points from the third quarter of 2009 and 128 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 15% on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.
The percentage of loans on which foreclosure actions were started during the fourth quarter was 1.2 percent, down 22 basis points from last quarter and up 12 basis points from one year ago.
The percentages of loans 90 days or more past due and loans in foreclosure set new record highs. The percentage of loans 30 days past due is still below the record set in the second quarter of 1985.
The data is far from good but it could well signal the situation is improving. The next few quarters seem poised to start showing better results. Granted given how bad these results are we have a long way to go before the data is actually good. “We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007, continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding, and culminated with a recession that saw 8.5 million people lose their jobs,” said Jay Brinkmann, MBA’s chief economist.
“The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight. We normally see a large spike in short-term mortgage delinquencies at the end of the year due to heating bills, Christmas expenditures and other seasonal factors. Not only did we not see that spike but the 30-day delinquencies actually fell by 16 basis points from 3.79% to 3.63%. Only three times before in the history of the MBA survey has the non-seasonally adjusted 30-day delinquency rate dropped between the third and fourth quarter and never by this magnitude.
“This drop is important because 30-day delinquencies have historically been a leading indicator of serious delinquencies and foreclosures. With fewer new loans going bad, the pool of seriously delinquent loans and foreclosures will eventually begin to shrink once the rate at which these problems are resolved exceeds the rate at which new problems come in. It also gives us growing confidence that the size of the problem now is about as bad as it will get.
“Despite the drop in short-term delinquencies, foreclosure rates could continue to climb, however, based on the ability of borrowers 90 days or more delinquent to solve their problems. A sizable number of the loans in the 90+ day delinquent bucket are in loan modification programs. They are carried as delinquent until borrowers demonstrate they will make the payments agreed to in the plans.
Related posts: Mortgage Delinquencies Continue to Climb (Nov 2009) – USA Housing Foreclosures Slowly Declining (Dec 2009) – Nearly 10% of Mortgages Delinquent or in Foreclosure – How Not to Convert Equity (Jan 2006)
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I adjusted my future retirement account 401(k) allocations today. I do not have as favorable an opinion of investing in the stock market today as I did a year ago. I would likely have allocated 20% to a money market fund except my 401(k) actually has two options – 1 paying 0.0% and the other paying -.02%.
They seem to believe they should make a significant profit while providing a horrible return (they are still taking over .5% of assets in fees – even though rates do not cover their fees). Those running funds have very little interest in providing value for 401(k) participants – they are mainly interested in raising fees (though supposedly they are suppose to be run by people with a fiduciary responsibility to the investors). Unfortunately most 401(k)s lock you away from the best options for an investor (such as Vanguard Funds).
My current allocation for future funds is 40% to USA stocks, 40% to Global stocks and 20% to inflation adjusted bonds. My current allocation in this retirement account is 10% real estate, 35% global stocks, 55% USA stocks. For all my retirement savings it is probably about 5% real estate, 35% global stocks, 5% money market, 55% USA stocks (which is a fairly aggressive mix).
As I have said many times I do not like bonds at this time. I don’t think the interest nearly justifies the risk of capital loss (due to inflation or interest rate risk). Inflation protected bonds are a much more acceptable option for someone that is worried about inflation (like I am over the next 10-20 years).
A number of the stock fund (even bond fund) options in my 401(k) have expense ratios above 1%. That is unacceptable. The average fees on the options I chose were .5%.
With my employee match I am adding over 10% of my income to my 401(k), which I think is a good aim for most everyone. Far too many people are unwilling to forgo luxuries to save appropriately for their retirement. This is a sign of financial illiteracy and an unwillingness to accept the responsibilities of modern life.
Related: Investing – My Thoughts at the End of 2009 – 401(k)s are a Great Way to Save for Retirement – Saving for Retirement – Managing Retirement Investment Risks
Home Prices in 20 U.S. Cities Rose for Fifth Month
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“The tax credit had the intended impact of drawing buyers in and lowering inventory,” Lawrence Yun, the real-estate agents group’s chief economist, said in a news conference. “An estimated 2 million buyers have taken advantage of the credit.”
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Foreclosure filings in 2009 will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc., the Irvine, California- based company said Dec. 10. This year’s filings will surpass 2008’s total of 3.2 million.
The housing market seems to have been stabilized with the tax credits, previous declines, continued low mortgage rates and a somewhat better credit environment. The market is still far from healthy. And the credit environment is still very tight. But housing may have hit a bottom nationwide, though this is not certain. I do expect mortgage rates to increase in 2010 which will put pressure on housing prices.
Related: House Prices Seem to be Stabilizing (Oct 2009) – USA Housing Foreclosures Slowly Declining – The Value of Home Ownership – Your Home as an Investment