Just when it seemed everyone thought the housing market was beginning to see some silver lining start to show, the MBA’s quarterly report on mortgage loan delinquencies and foreclosures offered a fresh reminder of how tenuous the situation remains for housing. Indeed, the report showed that 14.4 percent of mortgages were in some sort of trouble (either delinquent or entering foreclosure) during the third quarter, breaking the record high set only one quarter prior.
The scope of the labor market’s deterioration has proven a virtually insurmountable obstacle despite federal efforts to modify troubled loans, since re-paying a loan is tough to do when one (or more) member(s) of a household loses a job. With most signs pointing to the ranks of the unemployed rising well into next year, the housing market could be in for another leg down. Indeed, foreclosures have a strong historical link to prices. Namely, prices do not bottom out until foreclosure activity peaks. Thus, housing will likely face more pressure in many local markets until the recovery gains enough momentum such that job losses give way to job growth.