Six and half years after the end of the Great Recession and five years since foreclosures peaked, the mortgage delinquency rate is finally expected to normalize by the end of next year, according to a forecast by Transunion.
The credit reporting agency predicts the rate of seriously overdue mortgages will fall to 2.06 percent by the fourth quarter of 2016, within historic averages dating back to the late 1990s. The rate peaked in the first quarter of 2010 at 6.94 percent.
“We will be able to say we have fully recovered from the Great Recession at the end of 2016,” says Ezra Becker, TransUnion’s vice president of research and consulting. He noted that delinquency rates for credit cards and auto loans had already long recovered. “Mortgages were holding back the credit recovery,” he said.
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The mortgage market looks much different than in 2010, when 15.7 percent of mortgages belonged to borrowers with poor credit. Now, only 7.8 percent of all mortgages are held by subprime consumers.
“I don’t know if that is too high or too low. But I know that the newer loans are performing better,” said Becker. The number of foreclosure starts dropped 15 percent in November to the lowest monthly total since May 2005, according to a RealtyTrac report released Thursday.
TransUnion noted also noted that the average debt per borrower has steadily grown since 2012 and is forecast to reach $192,512 by the end of next year. That comes as housing prices have risen almost 31 percent since cratering in February 2012.
Still, the housing market has yet to completely recover from the downturn: Home values remain 5 percent off their July 2006 peak.