Friday, November 19, 2010

Colorado’s foreclosure inventory shrinking faster than the nation’s

As I reported earlier this week, according to the National Delinquency Survey, conducted by the Mortgage Bankers Association, Colorado’s foreclosure inventory fell to 2.4 percent of all mortgage loans during the third quarter, which is a drop from last year’s third quarter rate of 2.78 percent.

These levels have consistently been below the nationwide percentages of loans in foreclosure since the fourth quarter of 2007. The national rate for the percentage of loans in foreclosure is now 4.39 percent. 35 states reported foreclosure inventories that are proportionally larger, making Colorado the state with the 15th smallest foreclosure inventory.

As can be seen in the graph below, Colorado’s foreclosure inventory has also fallen farther from its peak than has been the case nationally, with the percentage of loans in foreclosure now down 14.6 percent from the 4th quarter 2009 peak, while nationally, the percentage of loans in foreclosure is only down 5.2 percent from its 1st quarter 2010 peak.

The percentage of mortgage loans in foreclosure has fallen for three quarters, and is down three times as much as the nation from peak levels.

From 2005 to 2007, Colorado’s foreclosure inventory was slightly larger than the national rate, but since the fourth quarter of 2007, the national foreclosure inventory increased at a faster rate than the Colorado inventory, and has been a larger proportion of loans overall. From the third quarter of 2007 to first quarter of 2010, the percentage of loans in foreclosure grew 173.9 percent. In Colorado, on the other hand, from the third quarter of 2007 to the fourth quarter of 2009, the percent of loans in foreclosure grew 64.3 percent.

Similar improvements are also evident when adding together foreclosure inventory and 90-day delinquencies (“seriously delinquent loans”). In Colorado the combined percentage of loan in either category this is down 13.9 percent, but nationally, it is down 10 percent. As can be seen in the graph below, both percentages peaked during the fourth quarter of 2009. Presently, the national percentage of loans in either category is 8.7 percent, but the rate in Colorado is 5.05 percent.

National growth has also outpaced Colorado. The percentage of loans either in foreclosure or seriously delinquent in Colorado and the nation were about equal during the 3rd quarter of 2007. From the 3rd quarter of 2007 to the fourth quarter of 2009, when percentages peaked, the percentage of loans either seriously delinquent or in foreclosure grew 227.7 percent nationally, while Colorado grew 115 percent.

New 30 day delinquencies show that Colorado is improving faster than the nation as well. 30-day delinquencies are subject to significant seasonality effects, so we need to compare year over year.

In new 30 day delinquencies measured year over year, Colorado’s percentage of loans entering a state of 30-day delinquency is down 8.2 percent, but nationally, the rate is down only 5.8 percent. We also find that Colorado’s rate is below the national rate with 3.57 percent of loans 30-days delinquent during the third quarter of this year as opposed to 2.55 percent in Colorado during the same period.

As can be seen in the graph below, examining growth in 30-day delinquencies since the 3rd quarter of 2006 (the earliest 3rd quarter data we have), we see that nationally, the percentage of new 30-day delinquencies is up 19.4 percent, and the Colorado rate is up by 11.3 percent.

The decline is foreclosure inventory according to the MBA report is reinforced by Colorado state data showing a continued drop in foreclosure filings in Colorado since the fourth quarter of 2009.

Although foreclosures continue to proceed to sale at auction in numbers similar to those seen since 2007, declines in foreclosure inventory, and drops in foreclosure filings point to stabilization in the housing market in Colorado, and will eventually manifest itself in declining totals for mortgage going to sale at auction as well.