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| Mortgage Delinquencies: Fact and Fiction |
Kenneth Harney, a highly respected columnist for the Washington
Post, expresses surprise in his column recently because home
buyers in high-cost parts of the country like California,
Hawaii, Boston and Washington, D.C. are not leading the nation
in mortgage delinquencies.
Mr. Harney states in near amazement that the opposite is
actually true--that home owners in the high-cost areas of the
nation have the lowest mortgage delinquency rate. The Mortgage
Bankers Association of America, which recently released its
latest survey on delinquency rates, states that Hawaii has the
lowest mortgage delinquency rate in the nation at only 0.89%,
followed by California at 1.02% and Virginia at 1.32%.
These numbers are contrasted by the states with the highest
delinquency rate: Mississippi at 8.5%, Louisiana - 6.7%
(pre-hurricane Katrina numbers), Indiana - 6.66%, Tennessee -
6.32%, Texas - 6.31% and Ohio - 6.13%. Notice that most of the
high delinquency rates occur in states with a lower than average
per capita income. Mississippi and Louisiana have |
some of the
lowest per capita incomes in the nation. Hawaii and California,
on the other hand, have some of the highest.
You could read more about the numbers in his column at the
Washington Post, but that newspaper requires you to sign-in and
become a member just to read its articles. An easier way is to
go to The Wichita Eagle (as in Wichita, Kansas) where Harney's
column is reprinted without the signing-in hassle.
While Harney doesn't explicitly state that he expects the high
cost areas to lead the country in mortgage delinquencies, the
tone of his column highly suggests that. Harney's recent columns
have made no secret of his belief that home owners in the U.S.
are overextending themselves because they are taking out more
interest-only mortgages and other non-traditional type of
mortgages to finance their home purchases and refinances. His
implied expectation is that folks with these types of loans will
be the new wave of foreclosures to hit the nation.
Actually, the opposite is true. Anybody with any long term
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in the mortgage or real estate industries will be
able to tell you that higher cost does not equal more frequent
mortgage delinquencies. Both mortgage delinquencies and
foreclosures are usually the result of loss of income.
Alcoholism, drug addiction and gambling addiction certainly are
factors, but the number one reason people cannot pay their bills
is because they are earning less money than they used to.
Every economic downturn produces a new wave of foreclosures, and
the next downturn should be no different. This next time around,
however, the pundits that predicted the crash of the so-called
"real estate bubble" will be telling anyone who will listen that
they told us so. They will equate the up tick in foreclosures
with the popping of the "real estate bubble."
They will be wrong.
Foreclosures and mortgage delinquencies follow the economic
cycle as sure as sunrise follows sunset. Folks who are laid off
their job or are the victims of downsizing are usually the ones
who experience difficulty paying the mortgage. I have |
helped
many clients avoid foreclosure, and the constant recurring theme
I see with the vast majority of those people is loss of income.
It's time that the media stopped trying to create the news
rather than simply to report it. All of the media hype about an
impending bursting of a "real estate bubble" is mere conjecture.
Most of those who believe that the bubble will burst believe it
because the media has harped on it so much. If you hear almost
anything long enough and often enough, you begin to believe it.
It's the underlying principle of today's advertising. For most
of the U.S., the "real estate bubble" will not burst.
It will merely hiss a bit.
Copyright 2005 Bob Roscoe
About the author:
20 years of industry experience has enabled Bob to cultivate an
eye for detail in mortgage applications and lends him an
expertise which ensures that mortgage transactions will flow
smoothly. "Stress free" is Bob's hallmark. Learn more at Mortgage
Marketing Associates
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