South Orange County Blog from Bob Phillips

First mortgage default rate falls to 1.13%

An article from Brena Swanson, of, April 15th, 2014:

options-300x86All five national indices showed a drop-off for the second month straight in March, according to the latest report  from the S&P Dow Jones Indices and Experian for the S&P/Experian consumer credit default indices.

Falling to the lowest rate since July, the national composite dropped to 1.20% in March, a decrease from 1.30% in February and a drastic decline from 1.50% in March. This is the lowest post-recession rate.

In addition, the first mortgage default rate was 1.13% in March, its lowest level since September 2006.

Second mortgages came in at 0.60% in March, down from 0.69% in February.

“Along with signs that the economy is improving, consumer credit default rates continue to gradually decline,” said   David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices.

“Economic reports confirm these improving trends. Gains were made in consumer confidence and the labor market as a result of fewer applicants filing for unemployment benefits. Consumer default rates have stabilized at levels similar to those seen before the financial crisis,” the report explained.  ( End of Brena’s article.)

From Bob Phillips:  Bank owned properties ( REOs.) represent only 1% of the market in South Orange County. In addition, short sales represent about 3% of our local inventory. Two years ago, distressed houses – the combination of REOs and short sales – accounted for over 25% of our transactions!  At the significantly lower prices of that time, 25% to 30% lower,  they were being scooped up by investors, who were paying cash.

In today’s market, due to higher prices, investor activity has practically dried up, but interestingly, there are still a substantial number of cash transactions, just now in the medium to higher price ranges, instead of the entry level, and not so much of distressed properties.  I attribute this to two factors that I can see.  First, people moving down from really big houses – downsizing. Secondly, from foreign buyers.

Neither of those demographics make for a high percentage of buyers, though, and that’s one reason that the present housing market, here in South Orange County is just plodding along, without much upward price pressure.  I wouldn’t be surprised for 2014 to be an extremely flat year, price wise, which is good for buyers who are still waiting in the wings.



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