Real Estate Investment: Return on Investment and Cash Flow Calculation

Declining Delinquency Rates

According to a report , released May 16th from the Mortgage Bankers Association (“MBA“), the U.S. mortgage delinquency rate declined in the first quarter of 2012 to the lowest level since 2008.

Specifically, the delinquency rate for residential mortgage loans decreased to a seasonally adjusted rate of 7.40 percent as of the end of the first quarter of 2012, down from 7.58 percent in the prior quarter. The rate peaked at 10.1 percent in the first quarter of 2010, and was last lower in the third quarter of 2008 when it was 6.99 percent.

According to the MBA, while mortgage delinquencies typically fall in the first quarter of the year, the declines this year were greater than the normal seasonal adjustments would predict. Moreover, newer delinquencies are down to the lowest level since the middle of 2007, indicating fewer new problems. As for the percentage of loans three payments or more past due, it is down to the lowest level since the end of 2008.

Trends Appear Favorable

Meanwhile, housing affordability reached a new high in the first quarter according to data from the National Association of Realtors, meaning that, at least for those with good credit, housing affordability conditions have never been better. Indeed, a companion index measuring the ability of first-time buyers to purchase a home also set a record.

And in other good news for the housing market, data released by the Commerce Department May 16th showed that housing starts increased 2.6 percent to an annual pace of 717,000 in April, beating analysts’ estimates, although permits for new building fell slightly after reaching a three-and-a-half year high the prior month.

These economic indicators suggest that, after years of languishing, the U.S. housing market appears to be making a slow but steady recovery in concert with an improving job market that is helping more borrowers pay their bills. Meanwhile, tighter lending standards are resulting in fewer defaults, and low interest rates are combining with decreased prices to increase affordability and stimulate demand.

Whether the housing market will continue to improve, and if so, to what extent this will help the overall economy, has yet to be seen, but the trends appear favorable.

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Tags: Housing Market Conditions, Housing Market News, Real Estate Investment

This entry was posted on Thursday, May 24th, 2012 at 9:30 pm and is filed under Housing Market News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.