Current Report – June 2017

Executive Summary

  • Black Knight Financial Services (BKFS) recently reported that the mortgage delinquency rate fell to 3.62% in March, and a review of historical U.S. mortgage delinquency data provided by the Federal Reserve Bank of St. Louis shows that this is the lowest rate of mortgage delinquency since late 2007.  This continues the trend of mortgage market normalization, though delinquencies have not yet fallen to their pre-recession level of less than 3% of borrowers delinquent.  On a similar note, BKFS reported a fall in the foreclosure rate to 0.88% of all mortgages, which is also a multi-year low.  However, considerable differences in foreclosure rates remain among U.S. states.  States with a judicial foreclosure process where proceedings must go through a court still have far higher foreclosure rates; judicial states New York and New Jersey had rates over 2.5% in March per the BKFS report, while non-judicial states Colorado and California recorded foreclosure rates of 0.2% and 0.3%, respectively.
  • After falling at the end of 2016, median asking rents for two-bedroom units have risen in two straight months according to latest data from Zillow.  Still, with the asking rate at $1,575 per month nationally in April, rents remain below the peak of $1,750 seen June 2014.  We expect rent price increases to ease in the near term given the high number of rental units under construction (U.S. Federal Reserve data show 612.1k housing units in buildings with five or more units under construction in April, the highest total since late 1974).
  • However, despite the large number of apartments approaching completion, upward pressure on rental prices should continue due to persistent tightness and rising prices in the for-sale market.  Real estate brokerage Redfin reported that housing supply edged up slightly to 3.1 months of supply nationally in April while the median sales price reached a new high of $280k.  26 of the 41 metro areas tracked by the Tides team set new highs for nominal post-recession median sales price in April.
  • The Federal Housing Finance Agency reported that the U.S. effective mortgage interest rate for loans closed decreased to 4.1% in April after peaking at 4.4% in February.  As such, mortgage interest rates are higher than the recent low of 3.72% seen just prior to the presidential election, though rates remain favorable when compared to the historical norm.
  • Single-family housing permits fell sharply in aggregate across the metro areas we track, totaling just 35,600 in April after reaching 40,100 in March.  Multi-family permits increased in April, totaling 24,200, but the six-month moving average fell slightly to a rate of 23,500 permits per month.

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