California’s late mortgage payments triple

Bubble
Watch
” digs into trends that may indicate economic and/or
housing market troubles ahead.

Buzz: The easing of “stay at home” orders may have
got some Californians in a homebuying mood but a growing number of
current owners can’t make their loan payments.
Coronavirus-related economic woes have more than tripled the number
of troubled mortgages in California — the third-largest jump in
the nation.

Source: Black Knight

The Trend

In May, 6.85% of California mortgages were estimated to be
“non-current,” that’s a troubled-loan category that includes
mortgages with missed payments plus those formally in the
foreclosure process. The rate’s 228% jump in six months from 2.1%
was topped by only two states: Alaska — up 256% — and Nevada
— up 236%.

Nationally 7.76% of mortgages are non-current, up 103% since
November. Black Knight noted that means 4.3 million U.S. homeowners
in May were past due on their mortgages or in active foreclosure,
up from 2 million in March.

The Dissection

Various financial stimulus efforts have not increased numerous
California borrowers’ ability to make house payments.

It’s not a huge surprise as California’s economy has been
battered by a wave of business limitations mandated since March to
slow the pandemic’s spread. Those “stay at home” orders are a
key reason why
California unemployment rate was 16.3% for May.

Yes, foreclosure numbers show record lows. But that’s because
state and federal authorities have clamped down on the foreclosure
process. But that hasn’t halted a growing share of owners being
forced to skip payments and/or seek loan forbearance agreements
with lenders.

Look, California’s problems could be worse: California’s
peak mortgage problems amid the Great Recession came in February
2010, with 15.65% of loans non-current. (By the way, the state’s
record low was 1.53% in December 2004.)

And California’s mortgage woes are nowhere near Mississippi,
with the nation’s biggest share of non-current loans at 12.73%.
Montana has the fewest troubled home loans at 5.13%.

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles
(five-alarm warning) … FOUR BUBBLES!

Not sure why these numbers aren’t setting off more alarms.
I’m guessing it’s a bet that a combination of an economic
rebound, even more real estate bailouts, and compassionate lenders
won’t let this become another housing debacle.

Dare I politely say, I’ve seen this story line before.

To be fair, with the economy slowly reopening there comes a
noteworthy bit of promising real estate news: Southern
California’s pending home sales have risen for eight straight
weeks.
That suggests there could be ample demand to scoop up
properties if these loan delinquencies eventually force homes to
the market. Related Articles

Source: FS – All – Real Estate News 1
California’s late mortgage payments triple