TRD Insights: Home loan delinquencies soar in cities

Risen driven by loans 30 to 59 days past due

National Insights /
Jul.July 20, 2020 07:30 AM
The U.S. home loan delinquency rate in April 2020 spiked 70 percent above its level a year ago, according to a recent report from real estate data company CoreLogic. (iStock)

The U.S. home loan delinquency rate in April 2020 spiked 70 percent above its level a year ago, according to a recent report from real estate data company CoreLogic. (iStock)

The U.S. home loan delinquency rate in April was 70 percent higher than a year ago, according to a recent report from real estate data company CoreLogic.

This growth was driven by early-stage delinquencies — loans with payments 30 to 59 days overdue. April’s early-stage delinquency rate of 4.2 percent was more than double the rate in April 2019. However, serious delinquencies, with payments at least 90 days past due, fell to 1.2 percent of loans, their lowest level since June 2000.

Although delinquencies have risen in each of the 10 largest metro areas, home loans in some places have performed better than in others. As a general rule, metros where governments enacted work and travel restrictions in March to curb the coronavirus outbreak clocked higher April delinquency rates than places that enacted restrictions later.

Miami

The major metro area with the highest delinquency rate was Miami, where the county’s mayor ordered all nonessential businesses to close in March but where coronavirus cases have recently skyrocketed. Miami’s home loan delinquency rate was the highest among the top 10 metro areas by population in April 2020, reaching 11.5 percent. That was a 6.7 percentage-point increase and a 140 percent increase from a year ago.

New York City

Next on the list is New York City, where the April delinquency rate climbed to 10.4 percent, more than double its level at the same time last year.

New York City was hit early and hard by the coronavirus outbreak and became its global epicenter in mid March, accounting for 5 percent of all cases globally. New York Gov. Andrew Cuomo and New York City Mayor Bill de Blasio at that point took aggressive steps to curb the virus’s spread by enacting restrictions on travel, dining, and all nonessential work.

Within weeks of the first confirmed coronavirus cases in the United States, thousands of New Yorkers lost their jobs as hotels, retailers and construction firms laid off or furloughed staff. Strapped for cash, New York borrowers were three times more likely to request forbearance on their home loans than the typical borrower, according to one analysis of 22,000 mortgages across the United States.

Las Vegas

The lion’s share of the Vegas workforce is in the leisure and hospitality industry, so hotel closures have sent unemployment claims skyward and decimated many residents’ budgets. The outlook in the coming months doesn’t look much better, with job losses related to coronavirus estimated to double those of the 2007-2009 recession. This has translated into poorer loan performance: In April 2020, the Las Vegas home loan delinquency rate increased to 8.5 percent, up from 3.2 percent a year earlier.

Houston

The delinquency rate in the self-proclaimed “energy capital” of the United States jumped to 8.2 percent in April 2020 from 4.5 percent a year before. Houston is suffering two overlapping global crises: the pandemic and cratering oil prices caused by a price war between Saudi Arabia and the Russian Federation. Major petroleum companies headquartered in Houston have laid off thousands of employees, and some 200,000 to 300,000 workers may lose their jobs, according to some estimates.

Chicago

The Chicago metro area’s delinquency rate in April 2020 was 6.6 percent, up from 4 percent a year ago. Compared to other cities, that might seem relatively modest, but clouds have been gathering over the Chicago residential market for some time: Cook County, which encloses Chicago, ranked among the 50 most vulnerable counties in the United States by foreclosure risk, according to a recent report from ATTOM Data Solutions.


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