Nearly every metro area in America is experiencing peak seriously delinquent mortgage loans, according to a Health of Housing Markets Report [1] (HoHM Report) from Nationwide economics. Levels are approaching the severity of the 2010 housing bust, economists say, adding that government interventions have made for low foreclosure activity.
The HoHM report is a quarterly measure of the health of the U.S. housing market using the LIHHM, a proprietary, data-driven near-term performance outlook of housing markets for the nation as a whole and for 400 metropolitan statistical areas (MSAs) and divisions. (The focus of the LIHHM is on the entire housing market's health, rather than a projection of house prices or home sales).
"The spike in mortgage delinquencies would normally have had a significantly negative impact, but delinquencies in the current environment should not be viewed as they have been in the past due to government policy changes," said Nationwide Senior Vice President and Chief Economist David Berson. "It seems the federal government learned a valuable lesson from the Great Recession, realizing that massive and timely forbearance policies were necessary. As a result, many of these loans have not slipped into foreclosure."
The National Lending Index of Healthy Housing Markets (LIHHM) remains in modestly positive territory, the researchers say, likely due to the expectation that a Joe Biden administration will further extend forbearance options.
The Q4 HoHM report also reveals that the overall health of the housing market is still being weighed down by a mix of factors, chief among them the still-recovering job market.
The U.S. Bureau of Labor Statistic showed the seventh consecutive month of job growth for the U.S. economy, the national unemployment rate is still at recession levels.
The price of houses is accelerating in response to the market's supply and demand imbalance. Historically low mortgage rates and homebuyers' desire for more spaciousness while working remotely have contributed to home price growth, says Berson.
"Home price appreciation has accelerated in many local markets in response to the extremely tight supply of homes. Even with low mortgage rates, which we expect will remain near record lows for the foreseeable future, rapidly rising prices are a risk for housing affordability, especially if inventory levels remain as low as expected."
The HoHM reports that the areas hardest hit by this include Texas and parts of the Pacific Coast. Metro markets that have the least positive LIHHM outlooks include San Angelo, Texas; Cheyenne, Wyoming; Odessa, Texas; Clarksville, Tennessee; Brownsville-Harlingen, Texas; Fort Worth-Arlington, Texas; Kennewick-Richland, Washington; State College, Pennsylvania; Manhattan, Kansas; and San Rafael, California.
By contrast, regions where home prices have remained more stable, such as in the Midwest, are showing positive or neutral rankings. Areas with the highest LIHHM rankings for Q4 include, in order, Saginaw, Michigan; Johnstown, Pennsylvania; St. Joseph, Missouri; Tuscaloosa, Alabama; Alexandria, Louisiana; Detroit, Michigan; Wheeling, West Virginia; Gape Girardeau, Missouri; Flint, Michigan; and Altoona, Pennsylvania.
More information about the HoHM Report, including the methodology used, can be found at blog.nationwide.com/housing [2].