The number of U.S. homes headed for foreclosure fell in the second quarter for the first time since the housing slump began in 2006, but improvements may be fleeting as the number of newly delinquent homeowners rose, a banking group said on Wednesday.
The percentage of loans in the foreclosure process declined last quarter to 4.57 percent from 4.63 percent in the first quarter, partially because of lender efforts to ease payments for homeowners and the impact of temporary home purchase tax credits, the Mortgage Bankers Association said in its quarterly delinquency report.
Foreclosures could head higher in coming months, however, as the percentage of borrowers at least one payment behind resumed its rise after easing late last year, the MBA said.
Short-term delinquencies are closely linked to unemployment benefit claims, which have been on the rise, said Jay Brinkmann, chief economist of the MBA.
On the surface, there is good news on the foreclosure front, but not on short term delinquencies, Brinkmann said. There's a little pause. It could be short term factors instead of a trend.
The delinquency rate for loans on single-family homes declined to a seasonally adjusted rate of 9.85 percent in the quarter from 10.06 percent in the first quarter, the MBA said. The unadjusted delinquency rate, which doesn't account for seasonal fluctuations in short-term defaults, increased to 9.4 percent from 9.38 percent.
Loans that were at least 90 days past due or in foreclosure fell 0.43 percentage point to 9.11 percent.
The pipeline of delinquencies and huge rise in properties on bank balance sheets last quarter has aggravated concerns that the critically important housing sector will drag the U.S. economy back into recession.
Foreclosures have also taken a toll on consumer confidence and are steering buyers away from the market as they expect the supply to pressure prices still lower, economists said.
Housing reports this week showed home re-sales plunged in July beneath already bearish expectations to their slowest pace in 15 years, while new home sales slumped last month to the worst level since the Commerce Department began collecting the data in 1963.
Home purchase tax credits offered by the U.S. government, now expired, may have helped lower foreclosure data as troubled borrowers sold their property, Brinkmann said.
That impact is not going to continue, so we'd have to keep an eye on that, he said.
(Editing by Padraic Cassidy)