What Could Hinder Real Estate

NEW YORK (The Street.com) -- There have been plenty of indicators that the real estate market has bottomed out and can do nothing but go up. The latest data from the Commerce Department further supports this argument.

New-home sales rose for the fourth month in a row, jumping by 9.6% in July to a seasonally adjusted rate of 433,000, up from a revised rate of 395,000 in June. Looking back, that is a 32% increase from January.

With this rising trend and current sales pace, there were 271,000 new homes for sales at the end of July and an inventory of 7.5 months, the lowest since April 2007.

Unfortunately, the sector is still not completely in the clear. The Mortgage Bankers Association reported that the number of homeowners that are delinquent of their mortgages has risen to an all-time high of 9.24% and increased by 44% in the second quarter from a year ago.

What's even more astonishing is that when one combines this number with the households that are already in the foreclosure process, the total number of loans that are past due is 13.16% for the quarter. This is a bit worrisome in that even though new homes are selling, what will happen to existing homes when, and if, they don't get out of the foreclosure process?

The good news is that the "subprime" mess seems to be over, illustrated by a major drop in foreclosures of subprime loans; however, what this means is that more are defaulting on traditional loans. In fact, fixed-rate mortgages accounted for one in every three foreclosure starts.