The housing market hit a milestone last week, although you’re more likely to see soot falling from the sky than confetti.
That’s because we’re still seeing the fallout from the foreclosure explosion of 2008 and 2009. In fact, the first data from 2010 shows that 10% of U.S. homeowners are delinquent on their mortgages – and that should mean even more foreclosures down the road.
According to a study by Lender Processing Services, 7.2 million home loans in the U.S. are delinquent. The worst offenders seem to be homeowners with bigger mortgages. The LPS data shows that loans with a principal balance of between $417,000 and $600,000 are at the top of the list of delinquent loans. That suggests the bloodletting from the sub-prime mortgage market has spilled over into the high-end mainstream mortgage market.
That’s the painful backdrop for mortgage rates this week.
With unemployment around 10% and millions of Americans behind on their house payments, the economy continues to struggle. When the economy is sputtering, mortgage rates tend to remain low, as the Federal Reserve tends to keep a lid on rates in an effort to keep credit flowing and generate more financial activity stemming from low-interest loans.
Right now, with U.S. consumers not spending money, discouraged about their financial futures and struggling to even make mortgage payments, it’s not exactly an environment for economic growth and the Federal Reserve knows it. That’s why, even though rates did bump up slightly last week, interest rates are low right now.