It’s a seemingly never-ending story in 2023. The 30-year fixed annual mortgage interest rate just reached a jaw-dropping 8.24% versus 3% to 4% a few years ago. Furthermore, some experts expect mortgage interest rates to stay elevated into 2024 at least. All of this raises the possibility of an imminent housing market crash.
Not only that, but recently released data pertaining to mortgage delinquencies is adding to the market’s anxiety. However, the full story will reveal that there’s some positive data in the mix as well.
Mortgage Delinquencies Indicate a Potential Housing Market Crash
Here’s the rundown. Research from Intercontinental Exchange shows that the U.S. mortgage delinquency rate rose in September, both month-over-month and year-over-year (YOY).
Specifically, the delinquency rate of mortgage loans 30 or more days past due, but not in foreclosure, climbed to 3.29% in September. That’s up 12 basis points (bps) from August and 13 basis points from September 2022.
Moreover, “serious” delinquencies — defined as being 90 or more days past due — increased by 7,000 to 455,000 in September. Presumably, the high costs associated with home loans in 2023 was a contributing factor to these startling stats.
On the other hand, it’s not all negative news. September 2023’s mortgage delinquencies, high as they were, actually came in 71 bps below the delinquencies recorded in September 2019 (i.e., pre-pandemic).
In addition, the number of loans in active foreclosure actually declined to 214,000. That’s the lowest level since March 2022 and roughly 25% below 2019 levels.
Plus, foreclosure starts fell 20.4% in September to 25,400. Hence, at least there were some bright spots in the Intercontinental Exchange’s findings.
Time to Sell Your Home and Stocks?
Since the data appears to be mixed, it’s too soon to conclude that a housing market crash is imminent. Really, there’s no need to sell your home and stocks in fear of a real estate market collapse.
It’s still important to watch out for the warning signs, though. September’s data points didn’t factor in the 8%-plus 30-year mortgage rates that we’re seeing in October. So, stay tuned for further signals that high interest rates may take a major toll on homebuyers and stock investors.
On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
