The long, steady recovery from the housing crisis and the recession that followed is nearly over, with the consumer lending market, including mortgages, expected to recover completely in 2016, according to a new report from Transunion.
Transunion published its 2016 forecast for the mortgage market this week, and the report states that the mortgage market will return to its pre-crisis state by the end of 2016.
According to Transunion’s analysis, the national mortgage loan serious delinquency rate, which is the ratio of borrowers 60 or more days past due, will decline from 2.5% at the end of 2015 to 2.06% at the conclusion of 2016.
Consumer level mortgage delinquency rates peaked at 6.94% during the first quarter of 2010 and have been declining nearly every quarter since, Transunion’s report showed.
According to Transunion’s report, the 60-day mortgage delinquency rate sat at 6.89% at the end of 2009, before jumping in the first quarter of 2010 to 6.94%.
By the end of 2010, the delinquency rate sat at 6.44%. At the end of 2011, the delinquency rate sat at 5.94%, falling again to 5.06% at the end of 2012.
After that, the delinquency rate dropped significantly, to 3.84% at the end of 2013. By the end of 2014, the delinquency rate was a 3.29%.
And the delinquency rate is expected to drop to 2.5% by the end of this year.
Transunion’s 2016 projection is that the year-end delinquency rate will sit at 2.06%, much more in line with the pre-crisis delinquency rate.
“We have observed that a ‘normal’ delinquency rate falls between 1.5% and 2% in the past, and our forecast puts the nation back at this level,” said Steve Chaouki, executive vice president and head of TransUnion’s financial services business unit.
“Newer vintage mortgage loans have been performing at this level for the last few years, but a combination of factors such as the funneling of bad mortgage loans through the foreclosure process, an improvement in the employment picture and an uptick in housing prices were needed to get back to normal,” Chaounki continued.
Transunion’s forecast also projects continued growth in the average mortgage debt per borrower, which has slowly gained in recent years, due in part to a rebound in housing prices.
Debt levels are expected to experience a $9,000+ gain by the end of next year from the year-end low observed in 2012, Transunion’s report shows.
At the end of 2012, the average mortgage debt per consumer was $183,339. It’s grown by roughly $2,000 per year since then.
The average mortgage debt per consumer is projected to finish 2015 at $189,917 and rise to $192,512 by the end of 2016.
“This is a clear indicator that housing prices are recovering and consumers are gaining access to more mortgage loans,” said Chaouki. “Fannie Mae’s recent announcement to use trended data in the assessment of mortgage applicants could also very well boost mortgage originations in the second half of 2016.”
According to Transunion’s report, previous analysis of the Fannie Mae announcement found that with the use of trended data, the percentage of consumers in the super prime risk tier would increase from 12% of the population to 21%.
Super prime consumers generally have the greatest access to new loans at the lowest pricing, Transunion said.
TransUnion’s data shows that the number of mortgage accounts has remained “relatively low” for the last three years, though growth has been seen during the last two years.
As of the third quarter of this year, there were 52.6 million mortgage accounts, which is approximately 7 million less than there were during the third quarter of 2009.
“We are a long way from returning to pre-recession levels in terms of mortgage accounts, but changing consumer preferences for housing also may play a role in this slow recovery,” Chaouki said. “If the economy continues to perform well, we do believe the net number of mortgages will increase over the next year.”