February may be the last month of record low delinquency rates, property analytics provider CoreLogic warns.
Across the country, only 3.6 percent of homeowners were delinquent on their mortgages in February while just 0.4 percent were in foreclosure. This is a record low — the lowest rate since January 1999 — and the 26th consecutive month that rates have fallen. But as the coronavirus pandemic continues to wreak havoc on the economy, all that progress could soon come undone.
“After a long period of decline, we are likely to see steady waves of delinquencies throughout the rest of 2020 and into 2021,” Dr. Frank Martell, president and CEO of CoreLogic, said in a press statement. “The pandemic and its impact on national employment is unfolding on a scale and at a speed never before experienced and without historical precedent.”
While delinquency rates have been falling nationwide, states with higher number of homes in negative equity are at a particularly high risk of a lockdown-caused delinquency surge. According to CoreLogic, Louisiana, Connecticut, Maryland and Illinois could see the highest rates of home delinquencies after the pandemic. As delinquencies and foreclosures take months to build up, the virus could impact rates for more than a year to come.
“The pandemic-induced closure of nonessential businesses caused the April unemployment rate to spike to its highest level in 80 years and will lead to a rise in delinquency and foreclosure,” Dr. Frank Nothaft, chief economist at CoreLogic, said in a press statement. “By the second half of 2021, we estimate a four-fold increase in the serious delinquency rate, barring additional policy efforts to assist borrowers in financial distress.”
Even as states open up, it is still difficult to say just how much of a blow the pandemic will have on the economy and, subsequently, home delinquency rates. Some argue for allowing people to go to work as soon as possible while many medical professionals worry that opening up too soon could cause a second wave of the virus.
“The next six months will provide important clues on whether public and private sector countermeasures — current and future — will soften the blow and help us avoid the protracted, widespread foreclosures and delinquencies experienced in the Great Recession,” Martell said.