Delinquency Rates Falling Quickly

In an earlier post, we looked at excess or hidden inventory of distressed properties which has hangs over the housing market, soon released for sale. The real estate market won’t recover until we work our way through most of this discounted inventory.

The better news is that as these properties exit the bottom of the inventory funnel, that is, there are fewer homes entering the top of the funnel. The best indicator of future foreclosures is the number of households that fall 90 days delinquent on their mortgage payments. This number is falling dramatically. An S&P hidden or Shadow Inventory Report stated:

“Our estimate of the months to clear the shadow inventory reached its peak at 57 months in early 2008. Back then, rising default rates caused a sharp increase in the overall amount of distressed properties. However, first default rates have been falling since March 2009), indicating that fewer loans are becoming distressed.”

In the end

The housing market still has a large number of distressed properties to work through. However, there is now an end in sight as long as delinquency rates continue to decline.

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