Home price growth is expected to slow over the next 12 months as delinquencies rise, according to new data from CoreLogic. This comes despite the rise in equity American homeowners enjoyed during the second quarter of 2020. Despite the strong home-purchase activity in Q2, unemployment is expected to remain high for the rest of the year, thereby slowing home price growth and increasing delinquencies.
Delinquent mortgages are home loans for which borrowers have failed to make timely payments as stipulated by the loan documents. Typically, delinquent mortgages are those where the payments are 90 days or more late and are already in foreclosure.
In a press release, CoreLogic’s chief economist Frank Nothaft stated, “The CoreLogic Home Price Index registered a 4.3% annual rise in prices through June, which supported an increase in home equity. In our latest forecast, national home price growth will slow to 0.6% in July 2021 with prices declining in 11 states. Thus, home equity gains will be negligible next year, with equity loss expected in several markets.”
Delinquent mortgage rates experienced doubled in June as late mortgages leveled out. At the time, CoreLogic reported that this was a worrisome sign for the market.
Delinquencies are expected to rise further, driven primarily by the unknown percentage of borrowers who are currently in forbearance who will be unlikely to resume making payments.
As for homeowner equity gains, among homeowners with mortgages, the Q2 year-over-year gain was 6.6%. This constitutes a collective equity gain of $620 billion since the same time last year. The states with the largest average gain in homeowner equity were Montant, Idaho, Washington, and Arizona. Additionally, the number of homes in negative equity in Q2 went down to 1.7 million (3.2% of all mortgaged properties; down 0.6% from June 2019).
Looking ahead, homeowner equity can be expected to rise in the short term, as strong demand for available homes remains. However, as the overall state of the economy and economic recovery remains uncertain, it is expected that equity gains will slow going into 2021.