US mortgage delinquency rates hit new low thanks to two factors

A combination of an improving jobs market and growing home equity pushed mortgage delinquency and foreclosure rates to their lowest levels in more than two decades.

The overall mortgage delinquency rate dropped 2.4% year over year in January to 3.4% - the lowest recorded delinquency rate in the US in at least 23 years, according to CoreLogic.

Early-stage delinquencies were down from 1.4% in December 2020 to 1.2% in January, adverse delinquencies posted a two-basis-point drop to 0.3%, and serious delinquencies fell two percentage points year over year to 1.9%.

The share of mortgages in some stage of the foreclosure process also decreased to a 23-year low of 0.2% in January. Transition rate was down by two basis points to 0.6%.

According to the report, rising home equity – fuelled by the 18.5% annual increase in national home prices – helped lower delinquency rates. The unemployment rate also declined for the sixth consecutive month in December to a pre-pandemic low of 4%.

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“Nonfarm employment grew by 6.7 million workers during 2021, the largest one-year increase, supporting income growth and keeping more families current on their loans,” said CoreLogic chief economist Frank Nothaft. “Nonetheless, places hit hard by natural disasters have experienced a spike in missed payments. Serious delinquency rates for December in the Houma-Thibodaux metro area were nearly two percentage points higher than immediately before Hurricane Ida.”

All but one metro area reported a slight annual decrease in the overall delinquency rate. The one area where delinquencies were unchanged in December 2021 was Houma-Thibodaux, La., which was impacted by Hurricane Ida in the fall.