Could Rising Mortgage Delinquencies Trigger a Further Housing Market Decline

By Mark J. Donovan

The 4th quarter of 2009 saw a precipitous increase in mortgage delinquencies, rising to 14%. Much of the rise was associated with credit-worthy borrowers. Current and performing mortgages fell to 86.4%, down 0.9% from the previous quarter. This represents the 7th consecutive quarter of decline.

The news is not surprising with so many homes’ underwater, worth less than their outstanding bank mortgage. People are choosing to spend their limited funds on staple items and forgo the house payment as they view the house payment as wasted money. This way of thinking only exacerbates the problem as banks then begin the foreclose process.

Without a significant improvement in the unemployment rate, which stands today at 9.7% officially and around 17% unofficially, the trend in delinquent home mortgage payments is likely to continue. This could spell trouble for an anemic housing market that is believed to already be at or near a bottom.