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Banking industry

Mortgage Delinquencies Reach Record High, Threatening Housing Prices

Strategic Insights

— 2 min read

The delinquency rate of mortgages has been escalating at a faster pace than the number of foreclosures being initiated, with the total number of houses in foreclosure or 90 days or more past due now exceeding the number of existing homes available for sale. This has created a significant overhang of shadow inventory, which is expected to continue exerting pressure on housing prices despite government support. The combination of high unemployment and falling home prices has led to a vicious cycle of foreclosures, distressed supply, and further pressure on home prices.

Key Takeaways:

  • The delinquency rate of mortgages is increasing at a faster pace than the number of foreclosures being initiated, with 2.5 million households in foreclosure or 90 days or more past due as of 2009 (Source: Zacks Equity Research).
  • The total number of houses in foreclosure or 90 days or more past due now exceeds the number of existing homes available for sale, creating a significant overhang of shadow inventory (Source: Zacks Equity Research).
  • The combination of high unemployment and falling home prices has led to a vicious cycle of foreclosures, distressed supply, and further pressure on home prices (Source: Zacks Equity Research).
  • The entire mortgage complex, including big banks like Bank of America (NYSE: BAC), mortgage insurers like MGIC (NYSE: MTG), and government-sponsored entities like Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), is not yet out of the woods (Source: Zacks Equity Research).
  • Gymboree Corp. (Nasdaq: GYMB) reported a 12.6% increase in earnings to $34.8 million, beating the Zacks Consensus Estimate of $30.9 million (Source: Zacks Equity Research).
  • Despite the strong earnings, Gymboree's outlook for the current quarter was downwardly revised due to weak sales and higher costs (Source: Zacks Equity Research).

Statistics:

  • 2.5 million households in foreclosure or 90 days or more past due as of 2009 (Source: Zacks Equity Research).
  • The number of houses in foreclosure or 90 days or more past due now exceeds the number of existing homes available for sale (Source: Zacks Equity Research).
  • 951 stores operated by Gymboree Corp. (Nasdaq: GYMB) across the U.S., Canada, and Puerto Rico as of October 2009 (Source: Zacks Equity Research).
  • $269.1 million in total sales by Gymboree Corp. (Nasdaq: GYMB) during the quarter, representing a 2% increase from the year-ago quarter (Source: Zacks Equity Research).

Sources:

  • Zacks Equity Research: "Mortgage Delinquencies: Record High"
  • Zacks Equity Research: "Gymboree Beats, but Outlook Down"
  • Zacks Equity Research: "About Zacks Equity Research"
  • Zacks Investment Research, Inc.: "About Us"
  • Zacks.com: "Zacks Rank"

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