Grab RSS Feed...by Anthony Buono
Mortgage foreclosures declined in the first quarter from a record high as U.S. employment and personal income rose, a sign the economic recovery may be helping to limit defaults.
The share of home loans in foreclosure fell from 4.64% to 4.52% in the prior three months. New foreclosures slid to 1.08 percent of loans from 1.27 percent.
American household budgets are improving as employment increases, wages rise and consumers limit new debt. More than 500,000 workers got jobs during the first quarter while U.S. personal income gained 2.1 percent. A Federal Reserve gauge tracking the amount of disposable income going to mortgage and credit card bills shrank to a 12-year low at the end of 2010.
Seriously Delinquent
The so-called seriously delinquent rate, or mortgages more than three months late including foreclosures, dropped half a percentage point to 8.1%, according to the report. It was the biggest decline since the beginning of the real estate bust in 2006. Legal actions to seize a home typically start at three months. The rate is tracked by economists because it captures foreclosures delayed by bank backlogs.
A reduction in defaults doesn’t mean the housing crisis is coming to an end. About 6.4 million home loans were either delinquent or in foreclosure in April.
Home Sales Drop
Sales of previously owned homes unexpectedly fell 0.8 percent to a 5.05 million annual pace in April, the National Association of Realtors said in a report today. Economists had expected a 5.2 million rate, based on the median of 75 estimates in a Bloomberg survey.
The median U.S. sales price dropped 5 percent from a year earlier to $163,700. About 37 percent of transactions were of foreclosed properties or short sales, when a lender agrees to accept less than the balance of the mortgage.
The share of mortgages overdue by one month or more rose in the first quarter to 8.32 percent from 8.25 percent, according to the MBA data. The increase was caused by a gain in 30-day delinquencies, to 3.35 percent from 3.26 percent.
Florida had the highest foreclosure rate in the first quarter, at 14 percent, followed by Nevada, at 9.3 percent, according to the report. New Jersey was next, at 7.7 percent.
New York’s foreclosure rate was 5.3 percent, Connecticut was 4.4 percent and the Massachusetts rate was 3.3 percent, according to the report.
The foreclosure rate for prime loans, traditionally the best-performing, declined to 3.52 percent from a record high of 3.67 percent in the prior quarter, according to the report.
Job Gains
Employment is the most important indicator for predicting the level of future foreclosures, said Brinkmann. A seven-month increase in jobs reported by the Labor Department signals foreclosure rates may continue to decline, he said.
Original article by Kathleen M. Howley on Bloomberg.com,/p>
