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Mortgage Performance: Loan Performance Insights Report Highlights August 2017

Foreclosure Inventory Rate Fell Back to Pre-Crisis Level in August 2017

  • The current- to 30-day transition rate held steady in August 2017 from a year earlier
  • North Dakota had the lowest delinquency rate of any state
  • San Francisco had the lowest delinquency rate of the largest metro areas

In August 2017, 4.6 percent of home mortgages were in some stage of delinquency, down from 5.2 percent a year earlier and the lowest for any August since 2006, when it was 4.4 percent, according to the latest CoreLogic Loan Performance Insights Report. The measure includes all home loans 30 days or more past due, including those in foreclosure. For the month of August, the share of delinquent mortgages was highest – 11.1 percent – in August 2010.

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The foreclosure inventory rate, meaning the share of mortgages in some stage of the foreclosure process, was 0.6 percent, down from 0.9 percent a year earlier. The foreclosure rate for August 2017 was the lowest level in 10 years, and fell back to pre-crisis levels. Before the foreclosure crisis began in mid-2007, the foreclosure inventory rate averaged 0.6 percent.

The share of mortgages that were 30 to 59 days past due – considered “early-stage” delinquencies – was 2 percent in August 2017, down from 2.1 percent in August 2016. The share of mortgages 60 to 89 days past due was 0.7 percent in August 2017, unchanged from August 2016.

In addition to delinquency rates, CoreLogic tracks the rate at which mortgages transition from one stage of delinquency to the next, such as going from being current to 30 days past due. Figure 1 shows that the current- to 30-day transition rate remained low in August. The August 2017 current- to 30-day rate was 0.9 percent, unchanged from August 2016. The 30- to 60-day transition rate was 16.7 percent in August 2017, up from 15.2 percent in August 2016, while the 60- to 90-day transition rate was 27.3 percent this August, up from 26.8 percent a year earlier.

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Figure 2 shows the states with the highest and lowest rate of mortgages in some stage of delinquency. In August 2017 that rate was highest in Mississippi – 8.4 percent — and North Dakota had the lowest rate at 2 percent. Figure 3 shows the 30-days-or-more past-due rate for the 10 largest metro areas[1]. That rate was highest – 6.8 percent – in the New York metro area and lowest – 1.8 percent – in San Francisco. Unlike San Francisco, the New York metro area is in a judicial foreclosure state where the foreclosure process has played out more gradually.

[1] Metro areas used in this report are the ten most populous Core Based Statistical Areas.

© 2017 CoreLogic, Inc. All rights reserved.

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Housing Trends: Homebuyers Typical Mortgage Payment Up 10 Percent Year Over Year

Forecasts Suggest the Payment Could Rise 11 Percent Over the Next Year

While home prices have risen about 6 percent over the past year, the mortgage payments that recent homebuyers have committed to have risen closer to 10 percent because of the increase in mortgage rates over the past year.

One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use something we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for in order to get a mortgage to buy the median-priced U.S. home. When adjusted for inflation, the typical mortgage payment also puts current payments in the proper historical context.

The change in the typical mortgage payment over the past year illustrates how it can be misleading to simply focus on the rise in home prices when assessing affordability. For example, in August this year the median sale price was up 6.3 percent from a year earlier in nominal terms, but the typical mortgage payment was up 10.1 percent because mortgage rates had increased nearly 0.5 percentage points over that 12-month period.

Figure 1 shows that while the inflation-adjusted typical mortgage payment has trended higher in recent years, in August 2017 it remained 34.7 percent below the all-time high payment of $1,250 in June 2006. That’s because the average mortgage rate back in June 2006 was about 6.7 percent, compared with 3.9 percent this August, and the inflation-adjusted median sale price in June 2006 was $242,723 (or $199,900 in 2006 dollars), compared with a median of $216,811 in August 2017.

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Forecasts from IHS Markit call for inflation and income to rise gradually over the next year, while a consensus forecast[1] suggests mortgage rates will gradually ratchet up about 70 basis points between August 2017 and August 2018. The CoreLogic Home Price Index forecast suggests the median sale price will rise about 3.0 percent in real terms over the same period. Based on these projections, the inflation-adjusted typical mortgage payment would rise from $816 this August to $908 by August 2018, an 11.3 percent year-over-year gain (Figure 2). Real disposable income is projected to rise about 3.6 percent over the same period, meaning next year’s homebuyers would see a larger chunk of their incomes devoted to mortgage payments.

[1] Based on the average mortgage rate forecast from Freddie Mac, Fannie Mae, Mortgage Bankers Association, National Association of Realtors, National Association of Home Builders and IHS Markit. 

 

© 2017 CoreLogic, Inc. All rights reserved

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Property Valuation: Home Price Index Highlights September 2017

U.S. Home Prices Increase 7 Percent

  • The lowest price tier increased 9.6 percent year over year.
  • Home prices forecast to rise 4.7 percent over the next year.
  • Utah and Washington continued to post double-digit year-over-year gains.

National home prices increased 7 percent year over year in September 2017, and are forecast to increase 4.7 percent from September 2017 to September 2018. Further, an analysis of the market by price tiers indicates that lower-priced homes experienced significantly higher gains, according to the latest CoreLogic Home Price Index (HPI®) Report.

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CoreLogic analyzes four individual home-price tiers that are calculated relative to the median national home sale price[1]. The lowest price tier increased 9.6 percent year over year, compared with 8.4 percent for the low- to middle-price tier, 7.3 percent for the middle- to moderate-price tier, and 5.6 percent for the high-price tier.  Figure 1 shows the historical levels of the four price tiers indexed to January 2006, shortly before each of the tiers hit its peak index value.

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The low-price and low to middle-price tiers are the only price tiers to pass their pre-housing-crisis peaks, by 17.7 percent and 0.3 percent, respectively. The middle- to moderate-price tier remains 0.4 percent below its peak, and the high-price tier remains 0.3 percent below its peak.

The overall HPI (all price tiers combined) has increased on a year-over-year basis every month since February 2012, and as of September 2017 prices were 0.5 percent higher than the pre-crisis peak set in April 2006. After hitting that 2006 peak, home prices fell 33.3 percent before bottoming out in March 2011. Since then home prices have risen 50.5 percent. Adjusting for inflation, U.S. home prices increased 5.2 percent year over year in September 2017, and were 16 percent below their peak[2]. Figure 2 shows the cumulative price movement since the inception of price declines for both the nominal HPI and the inflation-adjusted HPI and the time in years since the first decrease in the indices.

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Figure 3 shows the year-over-year HPI growth for the 25 highest-appreciating states in September 2017 along with their highest and lowest historical price changes. The state of Washington showed the largest HPI gain of all states in September 2017 with a 12.5 percent year-over-year increase, followed by Utah’s 10.5 percent gain. Prices in 37 states (including the District of Columbia) have risen above their pre-crisis peaks, and prices in two states are no more than 5 percent below their pre-crisis peaks. Of the seven states that had larger peak-to-trough declines than the national average, only California, Idaho, and Michigan have returned to the peak as of September 2017. Nevada home prices in September 2017 were the farthest below their all-time HPI high, still 24.6 percent below the March 2006 peak.

[1] The four price tiers are based on the median sale price and are as follows: homes priced at 75 percent or less of the median (low price), homes priced between 75 and 100 percent of the median (low-to-middle price), homes priced between 100 and 125 percent of the median (middle-to-moderate price) and homes priced greater than 125 percent of the median (high price).

[2] The Consumer Price Index (CPI) Less Shelter was used to create the inflation-adjusted HPI.

© 2017 CoreLogic, Inc. All rights reserved

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