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Despite the recovery, paying the mortgage can still be a hurdle

Comparing mortgage, credit card, and commercial real estate delinquency rates

It’s widely believed that the burst of the housing bubble triggered the Great Recession in 2007. That recession has been over for almost a decade, but the delinquency rate for single-family residential mortgages remains higher than it was before the recession. The blue line plots this mortgage delinquency rate on a quarterly basis since 2002. The delinquency rate was 3.7 percent in the fourth quarter of 2017, which is nearly 2 percentage points higher than its average 2002-2007 value of 1.9 percent. This isn’t necessarily what we’d expect, given current conditions: The S&P/Case-Shiller U.S. National Home Price Index reached its all-time peak in December 2017, and the average mortgage rate reached its all-time low in 2013 and has remained relatively low since. In addition, the economy is booming and the current unemployment rate is only 4.1 percent.

Moreover, this elevated mortgage delinquency rate is a bit puzzling if you consider the recovery made by the delinquency rates for credit card debt and commercial real estate loans. These are plotted using the red and green lines, respectively. The credit card delinquency rate in the fourth quarter of 2017 (2.6 percent) is lower than it was before the recession, and the delinquency rate of commercial real estate loans (0.7 percent) is at an all-time low. Given that these rates have recovered and dropped below their pre-recession levels, there must be some underlying factors preventing a similar recovery in residential mortgage loans.

How this graph was created: Search for “delinquency” and select the three (not seasonally adusted) series. Click on “Add to Graph.” Then change the starting date to “2002-01-01.”

Suggested by YiLi Chien.

View on FRED, series used in this post: DRBLACBN, DRCCLACBN, DRSFRMACBN

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