Rising unemployment continues to make more Americans miss their mortgage payments, a negative sign for the U.S. housing market that has lately enjoyed strong data on sales, prices and mortgage applications.
Among U.S. homeowners with mortgages, a record 7.32 percent were at least 30 days late on payments in July, up from about 4.5 percent a year earlier and 7.23 percent in June, according to monthly data from the Equifax credit bureau.
The rate of subprime mortgage delinquencies rose to 39.48 percent from 39.25 a month earlier, though it is still below levels reached earlier this year, according to the data obtained exclusively by Reuters.
Mortgage delinquencies are driven by three factors, two of which appear to be solved or at least improving, said Dann Adams, president of U.S. Information Systems for Equifax.
First, loose underwriting standards are largely a thing of the past, now that lenders demand higher credit scores and are more careful to verify income. Second, home prices are stabilizing, or even rising, in some U.S. markets, which puts less pressure on home owners.
But the third factor, unemployment, remains a worry.
“Even if it’s in the 200,000 to 400,000 (job losses) a month range, it will be a driver of these delinquency rates,” Adams said. “Until unemployment starts to flatten out and begin to return to hiring, these numbers will probably continue to push up.”
Against that backdrop, rising delinquencies suggest U.S. housing is not yet out of the woods.
Early-stage delinquencies are a leading indicator of future bankruptcy filings, and Equifax’s July data suggest bankruptcies will continue rising in coming months.
Bankruptcy filings were up 35 percent in July compared with a year earlier, accelerating from both June and May.
Still, while more Americans are late on their mortgage payments, they seemed to be keeping up with credit card bills.
Auto delinquency rates rose for the third straight month in July and are up about 13 percent over last year, to 0.75 percent. Subprime auto delinquencies, at 3.19 percent, are also up for three months running.
Meanwhile, student loan delinquencies are also up, partly reflecting graduates’ difficulty in landing jobs after college.