Economy Watch: Mortgage Delinquencies, Seniors Housing Confidence, Initial Unemployment Claims

The delinquency rate for mortgage loans on one- to four-unit U.S. residential properties decreased and builder confidence in the single-family 55-and-up housing market rose at the end of the second quarter. Initial unemployment claims decreased last week.

The delinquency rate for mortgage loans on one- to four-unit U.S. residential properties decreased to 6.04 percent of all loans outstanding at the end of the second quarter of 2014, according to the Mortgage Bankers Association on Thursday. That’s the lowest level since the fourth quarter of 2007. The delinquency rate decreased seven basis points from the previous quarter, and 92 basis points from a year earlier.

The delinquency rate includes loans that are at least one payment past due but doesn’t include loans in the process of foreclosure. The percentage of loans in foreclosure at the end of the second quarter was 2.49 percent, down 16 basis points from the first quarter of 2014 and 84 basis points lower than one year earlier, according to the MBA. This was the lowest foreclosure inventory rate since the first quarter of 2008.

The serious delinquency rate—that is, the percentage of loans that are 90 days or more past due or in the process of foreclosure—was 4.8 percent, a decrease of 24 basis points from the previous quarter and a drop of 108 basis points from the second quarter of 2013. Some 75 percent of seriously delinquent loans in second quarter 2014 were originated in 2007 and earlier. Loans vintage 2011 and later only accounted for 6 percent of all seriously delinquent loans.

Seniors Housing Builder Confidence Up

Builder confidence in the single-family 55-and-up housing market for the second quarter is up year over year, according to the National Association of Home Builders’ (NAHB) 55+ Housing Market Index, which was released on Thursday. Compared to the second quarter of 2013, the single-family index increased three points to 56, which is the highest second-quarter reading since the inception of the index in 2008 and the 11th quarter of year-over-year improvements in a row.

Two of the components of the 55+ index increased from a year ago: Current sales climbed seven points to 61, and expected sales for the next six months rose one point to 61. On the other hand, traffic of prospective buyers dropped six points to 42.

“One of the factors contributing to the positive signs in the 55+ housing market is the slow but steady increase in existing home sales in the last three months,” NAHB chief economist David Crowe noted in a statement. “The 55+ market is strongly driven by consumers being able to sell their existing homes at a favorable price in order to buy or rent in a 55+ community.”

Initial Claims Hit New Lows

During the week ending Aug. 2, initial unemployment claims were at an annualized 289,000, a decrease of 14,000 from the previous week, according to the U.S. Department of Labor on Thursday. The four-week moving average was 293,500, a decrease of 4,000 from the previous week. That’s the lowest level for the average since Feb. 25, 2006, when it was 290,750.

In fact, the weekly rate is now historically low. Initial weekly unemployment claims have, since the mid-1970s, generally floated between an annualized 300,000 and 500,000, with a few spikes over 600,000 (during the early 1980s slump and then the Great Recession). Only in the early 1970s was the rate typically below 300,000.

Wall Street had another losing day on Thursday, with the Dow Jones Industrial Average off 74.21 points, or 0.45 percent. The S&P 500 and the Nasdaq declined 0.55 percent and 0.44 percent, respectively.