Homebuyers are feeling historically great right about now, according to the Federal Reserve Bank of New York.
“Mortgage originations grew, to $427 billion. About 83,000 individuals had a new foreclosure notation added to their credit reports between April 1 and June 30, a new low in the 18-year history of the data,” said the report.
The historic low is probably a combination of at least four things:
- Interest rates are still near the lowest point they have ever been, making it cheaper for homeowners to service their debt.
- The labour market and increasing wage growth has improved the economic standing of many Americans.
- The credit quality of mortgages that have been given out since the financial crisis has been much higher than those beforehand. While this has changed recently, the relatively small number of low quality mortgages given out this cycle certainly helped keep the number down.
- Most of the bad loans and underwater mortgages from the housing crisis have likely washed their way out of the system.
Add all of these factors up and you get the lowest number of new foreclosures since 1998.
There was also some good news outside of simple foreclosures, as outlined by the NY Fed.
“Mortgage delinquencies continued the improving trend seen in the past 5 years. 1.8% of mortgage balances were 90 days delinquent at the end of 2016Q2, compared to 2.1% in the previous quarter,” said the report.
Put another way, fewer people are behind on their mortgage payments.
And as we noted on Tuesday, total mortgage debt in the US also declined while mortgage originations were up. This means that Americans are, on net, paying down debt.
To be fair, with the possibility of rising interest rates due to rate hikes from the Federal Reserve looming, foreclosures may be at or near their trough.
For now, however, it appears that homeowners are financially strong.
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