How optimistic should we be about the housing market? After reading press coverage of April’s mortgage stats, you’d be forgiven for being utterly confused on that count.
…there are tentative signs that improvement is coming to the stricken world of consumer credit.
Take the biggest component of consumer debt: mortgages.
Nearly a year after the recession likely ended, and despite huge government support, the housing market looks as sick as ever.
Here’s the headline of The New York Times’s news story, which takes the middle road:
Mortgage Data Leaves Bankers Uncertain of Trend
This is about where you throw your hands up and go watch Fox News or something—where certitude still rules in a post-modern age.
But don’t do that! Let’s walk through some of the coverage.
Gross gets his partially sunny outlook (and it’s worth remembering that he wrote an, ahem, glass-half-full Newsweek cover story last month headlined “America’s Back! The Remarkable Tale of Our Economic Turnaround”) from a credit-bureau’s report that mortgage delinquency rate declined for the first time in three years and from the HUD chief’s report that foreclosure starts dropped 27 percent from a year ago. Also, all foreclosures were down 2 percent from a year ago.
Yeah, don’t get too excited yet. Prices are falling again and the homebuying tax credit—which has been a critical prop of prices and sales—expired at the end of the month. Mortgage applications were off 27 percent last month. The foreclosure actually rate soared to 4.6 percent in the first quarter from 3.9 percent a year before, as the Times points out.
There are apparently questions (more than usual) about the seasonal adjustment of the numbers these days. But taking that into account, look at delinquencies and foreclosures, in the first quarter. More than one in seven mortgages is delinquent or in foreclosure. Calculated Risk points out that 30-day delinquencies increased in the first quarter, which means more people are getting behind on payments for the first time.
Most everybody mentions that the seasonal adjustments may be screwing the numbers up. Nobody does a good job of explaining why, since we’re normally supposed to rely on seasonal adjustments, we’re maybe not supposed to now.
All this is going on with near-record-low mortgage rates. This sucker’s got to hit bottom at some point, but these aren’t the marks of a recovery.
But reading these stories didn’t enlighten me much at all about what’s going on and why. I was still confused until I went over to the WSJ’s news pages, where my old colleague Bob Hagerty handles this muddle best. Here’s his lede:
The number of American households behind on mortgage payments appears to have reached a plateau at a high level as the economy recovers, a survey showed Wednesday.
At the same time, people who fall behind on their mortgages are staying in their homes longer as banks struggle with huge volumes of calls for help and with the complexities of federal and state foreclosure-prevention programs.
And he has actual on-the-ground reporting to back it up.
Josh Zollinger, owner of Orange Coast Realty in Mission Viejo, Calif., said some of his clients have gone two years without paying. Some homeowners extend their free stays by seeking loan modifications shortly before their homes are due to be auctioned, he said.
Distressed borrowers are staying put for long periods, partly because the federal government has leaned on banks to offer lower payments to avert as many foreclosures as possible, a time-consuming process.
Ah, context and reporting! What a concept!