Housing Ended 2022 Strong, But Delinquencies Will Rise In 2023

Despite the market correction, housing ended 2022 on a strong note, CoreLogic reports.

Delinquencies and foreclosures were historically low throughout 2022 and remained that way at year-end, with both seeing only minor upticks in December compared to the previous six months. Both hit their bottoms in early 2022 and have barely moved since.

Only 3% of all mortgages in the U.S. were in some stage of delinquency, including in foreclosure, with a 0.4% decrease YOY and less than a 0.1% increase month-over-month.

Serious delinquencies fell 0.7% YOY, accounting for 1.2% of mortgages compared to 1.9% in December 2021 and a high of 4.3% in August 2020. Adverse delinquencies also dropped, down 0.1% YOY to 0.3%.

Homeowners are beginning to feel the effects of inflation, however. Early-stage delinquencies increased by 0.2% YOY to 1.4% of all mortgages, and the transition rate of mortgages going from current to 30 days overdue was up as well.

Despite this, delinquencies remain at their lowest recorded level in CoreLogic’s data, which goes back to 1999.

“Mortgage delinquency rates continued to post some of the strongest performance in three years in December, as a healthy job market helped borrowers remain current on their payments,” said Molly Boesel, principal economist at CoreLogic. 

“High amounts of home equity cushioned those borrowers who were far behind, keeping them from moving into foreclosure. While there was a small uptick in early-stage delinquencies and foreclosure inventory over 2022, other delinquency measures fell to new lows throughout the year.”

But while homeowners stayed flush throughout 2022, a different narrative may play out in 2023.

A recent study by Jackson Associates predicted that inflation will “more than double ‘seriously delinquent’ mortgages” by the end of 2023 to 580,000. If that happens, serious delinquencies will be at their highest point since 2016.

“Households will begin facing the unpleasant reality that they are back in a pre-COVID financial position that has deteriorated because inflated costs of living have significantly outstripped wage gains,” said Jerry Jackson, an economist and one of the study’s authors.

Personal debt is on the rise as more Americans rely on credit cards to combat inflated food, gas, and shelter prices. Household debt jumped 8.5% in 2022 to $16.9 trillion. That debt started as an increase in American mortgages while rates were low, but has shifted to credit card debt in the past few quarters.

Moody’s said a mild recession and increased delinquencies on auto and home loans are likely to follow.

“We expect residential mortgage delinquencies to continue rising, though they are unlikely to reach 2019 levels until 2024,” the company noted.

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