Fascinating Mortgage & Housing Data Points

My Washington Post column got rolled over until next week (caused by a few snafus on my side and theirs). There are some fascinating details within the column, and since it won’t be published for a few days, I wanted to share them with you. Here is an early look:

Foreclosure Details

-There have been an average of 1.6 million nationwide foreclosure starts per year for the past five years.

-Foreclosure starts nationwide increased on an annual basis after 27 consecutive months of year-over-year declines.

-Bank repossessions are still down 18% year over year. Voluntary foreclosure freezes and increasing pre-foreclosure sales are the primary factors.

-Distressed home sales, which include both foreclosures and short sales, had fallen substantially. They were down to 28% for April 2012 – significantly less than the 37% in April 2011.

-Distressed sales tend to be about 20% less than non-distressed sales.

With that as a background, I spoke with ace housing analyst Laurie Goodman of Amherst Securities. Goodman dazzled me with several astonishing statistics.

Let’s briefly look at two of these:

1) 2.8 million Americans are 12 months or more behind on their mortgages.

This truly amazing data point represents a very sad fact of the housing market. Once a homeowner falls that far behind in their mortgage, the odds are that they will never catch up. (Mortgage mods are likely to fail at an exceedingly high rate as well). Nearly all of these 2.8 million homes are likely to be some sort of distressed sale — short sale, auction, walkaway or foreclosure.

The bottom line is it means we are looking at a minimum of another 3 million homes going into foreclosure (or some variant) over the next few years.

Beyond the coming wave of foreclosures, credit availability is another factor holding housing activity down:

2) “Since 2007, 19% of all borrowers (~9 million borrowers) have gone >90 days delinquent on their mortgages, or have had their mortgage liquidated.

In other words, one in five people who held or qualified for a mortgage not too long ago would not today. The 90 days delinquency on their credit reports prevents them from qualifying for a new mortgage.

This is a very significant data point to the idea of a housing turnaround. Why? Based on this delinquency alone, nearly all of these borrowers — about 9 million current homeowners — would be unable to qualify for bank loan today. That is 9 million potential home buyers who are effectively barred from the market due to their credit scores. Removing that many people as potential home buyers amounts to a a huge reduction in demand.

Its not a surprise that Goodman is not expecting a quick housing recovery. She notes an “L” shaped recovery is the most likely outcome. In hr opinion, Home prices have 3-5% more price downside. The, and are likely to stay flat for another 3-5 years to come.