Volume 185 | May 17, 2024

Guardian Asset Management

Weekly Newsletter

Guardian endeavors to provide you with the latest in housing, industry and market news from Washington D.C. and around the country. It is our goal as your industry partner to be informative, relative and topical.

Foreclosure Activity Nationwide

Shows Slight Decline in April 2024

 ATTOM, a leading curator of land, property, and real estate data, today released its April 2024 U.S. Foreclosure Market Report, which shows there were a total of 31,649 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — down 4 percent from a month ago and down 4 percent from a year ago.

“April’s foreclosure numbers highlight a mixed landscape in the U.S. housing market,” said Rob Barber, CEO at ATTOM. “While there is a general downtrend in foreclosure starts and filings, we have also seen an increase in completed foreclosures. This mixed activity underscores the importance of closely monitoring these developments to understand the ongoing dynamics in the real estate market.”

VA delinquencies jumped

following call for foreclosure ban

Delinquencies on loans partially guaranteed by the Department of Veterans Affairs jumped notably within the course of the first quarter while other late payments were lower or almost flat, according to new Mortgage Bankers Association data.

The delinquency rate for VA loans jumped 59 basis points on a consecutive quarter basis to 4.66% during the period. In contrast, late payments on Federal Housing Administration-insured loans fell 42 basis points to 10.39%. Conventional delinquencies rose a basis point to 2.62%.

"Overall mortgage delinquencies increased slightly in the first quarter of 2024, but not across all three of the major loan types," Marina Walsh, vice president of industry analysis at the Mortgage Bankers Association, said in a press release. "Delinquencies declined for FHA loans, were relatively flat for conventional loans, and increased for VA loans."

A call by the VA for a foreclosure moratorium in late 2023 contributed to the disparity in delinquency trends, according to Walsh.

"The Department of Veterans Affairs encouraged mortgage servicers to implement a foreclosure moratorium until the end of May 2024, with this pause came an increase in VA loans that remained delinquent but not in foreclosure inventory," Walsh she said.

US Housing Starts, Permits Fall Short

as Mortgage Rates Rise

New US home construction rose by less than forecast in April and permits for new activity dropped, suggesting the recent rise in mortgage rates is giving builders pause.

Housing starts increased 5.7% to a 1.36 million annualized rate after downward revisions to prior months, according to government data released Thursday. The median forecast in a Bloomberg survey of economists called for a 1.42 million rate.

Authorized permits for single-family home construction have now dropped for three straight months to the lowest level since August after trending higher toward the end of last year. That may constrain beginning home construction going forward.

Building permits for all units, a proxy for future construction, fell 3% to a 1.44 million rate, the lowest since the end of 2022. That mostly reflected a large drop in authorizations for apartment complexes.

Data at the start of the year indicated inflation was proving stubborn, prompting traders to pull back bets on when the Federal Reserve would cut interest rates this year and therefore keeping mortgage rates above 7%.

Most US Homes Are Overvalued

Home prices across the nation are overvalued, in many cases by more than 10%, according to a new report on RMBS by Fitch Ratings. Indeed, in 4Q23 homes in the U.S. were overvalued by 11.1% on a population-weighted average basis – though prices may moderate later in the year.

Overvaluation was found in 90% of U.S. metropolitan statistical areas — a slight dip from the 91% affected in 3Q2023. Among these, 56% were overvalued by more than 10%, slightly fewer than the 58% in the previous quarter.

The most overvalued metro in the nation among the 50 with the highest populations was Memphis, including the Tennessee-Mississippi-Arkansas statistical area. The region is considered the commercial and cultural hub of the Mid-South and covers eleven counties in the three states.

Also in the top three overvalued MSAs were Buffalo-Cheektowaga-Niagara Falls, NY and Indianapolis-Carmel-Anderson, IN.

Mortgage Delinquencies Up 38 Basis Points

YOY In Q1 2024

A rise in mortgage delinquency rates in the first quarter of 2024 was highlighted by substantial year-over-year increases in payments past due for FHA and VA loans in particular.

Results of the Mortgage Bankers Association’s (MBA) latest survey indicated the delinquency rate was up six basis points from the fourth quarter of 2023 and up 38 basis points from one year ago. The delinquency rate for conventional loans increased one basis point to 2.62% over the previous quarter, while FHA loan delinquencies decreased 42 basis points to 10.39%. VA delinquencies increased by 59 basis points to 4.66% in that same time frame. 

Compared to last year however, total mortgage delinquencies increased on all loan types YOY -- by 18 basis points for conventional loans, 112 basis points for FHA loans, and 68 basis points for VA loans. 

“Overall mortgage delinquencies increased slightly in the first quarter of 2024, but not across all three of the major loan types. Delinquencies declined for FHA loans, were relatively flat for conventional loans, and increased for VA loans,” MBA’s Vice President of Industry Analysis Marina Walsh said. “Notably, all three loan types saw an increase in delinquencies compared to one year ago. Higher unemployment, lower personal savings, increases in property taxes and insurance, and a run-up in credit card debt and delinquency contributed to conditions that would make it tougher for some homeowners to make their mortgage payments.”

Mortgage rate forecast for May 2024:

No break for homebuyers

As May ushers in peak real estate season, forecasters aren’t anticipating a break from the current spate of 7 percent mortgages.

“The wind continues to blow in the wrong direction for mortgage borrowers,” says Greg McBride, Bankrate’s chief financial analyst. “Rates have spiked as inflation runs hot, the Fed timetable for interest rate cuts gets pushed back and the supply of government debt rises. Expect mortgage rates to remain well above 7 percent in May, and maybe closer to 8 percent if the run of disappointing inflation data continues.”

Rates last hit 8 percent in October 2023. At that rate and the current median home price of $393,500, a borrower putting 3 percent down would pay about $250 more a month compared to a 7 percent loan.

While the Fed doesn’t establish 30-year mortgage prices, its moves can have immediate ripple effects, says Robert Frick, corporate economist at Navy Federal Credit Union.

“We shouldn’t expect relief from current high mortgage rates in May,” says Frick. “The root cause is inflation, which remains stubborn and is likely to hold steady for now. This in turn means the Fed won’t be cutting its rates any time soon, and cutting those rates would quickly filter through to the mortgage market.”

The Fed delay has upended 2024 forecasts that once called for rates below 6 percent.