Aug 10 (Reuters) – U.S. mortgage delinquency rates reached a historic low in the second quarter, thanks to a strong job market and low interest rates. Despite the significant increase in mortgage rates over the past two years, a report on Thursday stated that delinquency rates fell to 3.37% by the end of the second quarter. This is the lowest rate since the Mortgage Bankers Association (MBA) began collecting data in 1979, down from 3.64% compared to the previous year. The report also highlighted that seriously delinquent loans, which are 90 days or more past due or in the process of foreclosure, reached their lowest non-seasonally adjusted rate in 23 years at 1.61%. Economists are closely monitoring mortgage delinquency rates to identify any signs of weakness following the Federal Reserve’s aggressive 525 basis point interest rate increase since March 2022, which has increased borrowing costs across the board. The MBA noted that many borrowers have been able to handle the surge in mortgage costs due to a resilient job market and strong wage growth. Additionally, most homeowners are paying interest rates well below those charged on new loans. Real estate brokers estimated that more than eight in 10 outstanding loans had rates below 5% at the end of 2022, significantly lower than the MBA’s most recent contract rate above 7%. While the share of homeowners paying such low rates is declining, many are choosing to stay in their current homes rather than move and take on a new loan at the current high rates. However, despite the historically low delinquency rate, the MBA highlighted that not all borrowers have been able to withstand the recent stress of increased interest rates. The delinquency rate on loans for low-income and first-time buyers, backed by the Federal Housing Administration (FHA), increased by 10 basis points annually to 8.95% in the second quarter. In a separate report, the National Association of Realtors revealed that the median home price in the second quarter fell by 2.4% compared to the previous year, reaching $406,000. This decline varied significantly across different regions. Lawrence Yun, the chief economist of the NAR, attributed the decrease in home sales to higher mortgage rates and limited inventory. However, he also noted that affordability challenges are easing due to moderating or falling home prices, coupled with an increase in the number of jobs and incomes. Reporting by Safiyah Riddle; Editing by Dan Burns and Marguerita ChoyOur Standards: The Thomson Reuters Trust Principles.
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