Mortgage Delinquencies Today Can Tell Us A lot About Where Things are Going

There are some rumblings under the surface in the Real Estate world.  Metros in Florida, Texas, Arizona and Nevada have seen spikes in homes for sale, distressed properties and foreclosures.  Does that make you a little nervous that we’re headed toward another crash?  If so, don’t let it.

First, the word “Spike” is subjective – especially when compared to another housing crash in recent history.

Second, during the great recession between 2007-2011, over 9 million families went through some sort of distressed sale.  In 2024, that number was a total of 300,000.

So, the answer is “NO. The sky is not falling”.

Here’s why.  Mortgage delinquencies are categorized as loans in the beginning stage we are in the very beginning stages for a potential foreclosure – which can take months.  And the truth is, based on current data, delinquencies as a whole are on par with where they ended in 2024.  This says that there is no uptick which would provide a signal that there was trouble ahead.

Take a look at the graph below and note that FHA mortgages make up the largest share of new delinquencies.

Based on our experience, borrowers with FHA loans tend to be more exposed to shifts in the economy.  With an uptick in the fear of a recession or economic slowdown, inflation and employment challenges, it makes sense this sector of homeowners (ones with FHA loans) are realizing higher rates of delinquencies.

Not a Signal That A Crash is Coming

The graph above also shows that three loan types (Conventional, VA and others) show remain relatively low and stable.  Going back 20 years, you will see all 4 categories of borrowers realized a surge in delinquencies.

One thing to also note, FHA loans make up a very small portion of all home loans nationwide (only 12%). And there is not a signal of a crisis.

The Region with the Most FHA Loans

Like anything else in the real estate sector, local data matters.  The image below from the Federal Reserve in New York shows the overall concentration of FHA loans by state (not loans that are delinquent).  It shows that some regions of the country where there is a higher concentration of FHA loans than others – particularly in Southern states.

What if You're Experiencing Challenges Paying Your Mortgage

Foreclosure is a place all homeowners want to avoid.  If you’re experiencing challenges in making those payments, don’t wait to take action.

Call your mortgage lender or provider as soon as possible.  They may be able to provide insight on how to set up repayment plan or loan modification (“loan mod”).  Fortunately today, many homeowners have enough equity to sell your home and avoid foreclosure.  I suspect some delinquencies will go that route since homeowners today are experiencing near record levels of home equity. 

What Next

Foreclosures are trending in a normal direction, but they are not even close to where they were in 2008.  So, they don’t point toward a real estate crash any time soon.

We will be watching the market in the days, weeks and months ahead.  If you’d like to get the latest on interest rates, listings or potential listings, let's chat to make sure you get the latest and greatest in real estate news for Long Beach, Los Angeles, Orange and Riverside Counties.