The average 30-year fixed mortgage rate continues to fall this week — from 4.74% to 4.67%, according to the BankingMyWay Weekly Mortgage Rate Tracker.
The slide continues as questions over the health of the economy mount. Last week’s headlines in that regard include a statement from Federal Reserve Bank of Cleveland economists that the home foreclosure problem won’t be going away anytime soon.
Tim Dunne and Kyle Fee, authors of the report “Changes in Foreclosure and Unemployment Across States” say that foreclosures are tightly bound to state-by-state unemployment rates, and that the trends show high foreclosure rates continuing over the long haul.
With respect to unemployment rates, many commentators think that unemployment will fall slowly, as structural adjustments in the labor force take time.
Alternatively, if history is any guide, high foreclosure start rates are likely to persist, as well. This conjecture is based on the observation that states that experienced boom-bust housing cycles in the past (such as Texas, Oklahoma, Massachusetts and California) had elevated foreclosure starts for years after the peak in foreclosure starts and inventory, and these previous boom-bust cycles were small in comparison to the current cycle.
The authors don’t provide a timetable on how long the foreclosure crisis will last, but they do indicate that as long as high unemployment clouds the U.S. economic landscape, then the foreclosure problem should be hanging around, too.
There was some good news on the housing front, as Barclays Capital (Stock Quote: BCS) says that a peak in shadow housing inventory should occur this summer, before receding toward the end of the year. “Shadow” inventories involve home loans where the mortgage loan delinquency exceeds 90 days. Barclays expects the housing market to absorb 130,000 distressed properties each month, with approximately 4.7 million distressed homes being sold over the next three years.