Housing crash fades as defaults decline to 2007 level

Negative Equity

The number of home loans with negative equity fell to about 9 million or 18% of homes with a mortgage in January, the report said. That’s down 41% from a year earlier and 47% lower than the peak of 17 million loans in February 2011.

U.S. home prices climbed at the fastest pace since May 2006, rising 9.3% in February from a year earlier, according to an April 30 report by the S&P/Case-Shiller index of property values.

There’s a “feeding frenzy in housing” as Americans seek to take advantage of prices about 29% below their 2006 peak and mortgage rates near record lows, said Ross Perot Jr., 54, chairman of Dallas-based real estate company Hillwood Development Co., in a telephone interview. Perot’s father, H. Ross Perot, twice ran for president as an independent candidate.

‘Very Shrewd’

“The big picture: this economy is coming back,” Perot said during a telephone interview from Newport Beach, California, where he was breaking ground on a condo project backed by his Dallas-based company. “The American people are very shrewd and they realize it’s a great time to borrow to buy a home because pricing is very cheap.”

The average rate for a 30-year fixed mortgage dropped to 3.35% last week, down from 3.84% a year ago as the Federal Reserve has bought $85 billion of bonds to stimulate the economy. The average 15-year rate is a record low 2.56%.

Demand is also rising as more Americans find jobs. The unemployment rate fell to 7.5% in April, its lowest rate since December 2008, the Labor Department reported May 3.

While new defaults have declined, loans that are at least 90 days delinquent account for a growing share of the non- performing mortgage pie: 62% this year compared with 30% in 2005, according to Lender Processing Services. The late-stage delinquency loans are increasingly concentrated in so-called judicial states that require court approval for foreclosures.

Florida had the highest rate of non-current mortgages with 18.2% of loans either delinquent or having received a foreclosure notice, followed by New Jersey, Mississippi, Nevada and New York. While Florida’s problem loans declined over the last year, the number increased 5.8% in New Jersey and 6.1% in New York. All three are judicial states, where homes languish in foreclosure more than 1,000 days while waiting to be repossessed.

“The new problems coming into the system have alleviated,” Blecher said in a telephone interview. “It’s really about addressing what’s still in the pipeline.”

Bloomberg News

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