It is a well know axiom that where there is economic expansion we should expect to see a strengthening of the local real estate market. Jobs bring people, people need homes. One should expect the opposite to be true. It has never been so clear until you line up the unemployment with mortgage delinquencies.
Mortgage Delinquencies Trail Unemployment
One in eleven real estate loans is delinquent* according to the Federal Reserve Board’s latest figures released though Q3 2009. At 9.12%, the current delinquency rate is higher than any point in “recorded history”. The delinquency rate for residential loans is even higher at 9.81%.
Today’s current 10.2-percent unemployment rate is as high as it has been since early 1983. If the current trend is any indication, we will definitely challenge the 10.8-percent unemployment of 1982, which is the highest in the Bureau of Labor Statistics’ reported data going back to 1948.
In the early 1990’s, the mortgage delinquencies peaked one and one-quarter years after the unemployment peak. In the brief uptick of unemployment in mid-2002, there was a two-year lag before the corresponding peak in mortgage delinquencies.
We have not yet hit the peak of unemployment and the world economy has become more intertwined than ever before. It would seem despite government attempts to mitigate the mortgage crisis, there are likely to be several more years of troubled assets… which means several more years of opportunities for investors.
We won’t make a general statement (to our national audience) about what real estate will do, because local economic and employment conditions vary. But, by viewing the FinestExpert heat maps and trend charts in your area of interest, you will find the insights you need to determine the best time to buy in any given market.
* Delinquent loans are those past due thirty days or more and still accruing interest as well as those in nonaccrual status.
