A new study from Fannie Mae shows that the jobs market correlates closely to the number of homes in foreclosures, according to an article by Susanna Kim for The Home Story.

Foreclosure starts decreased in July to the lowest level since May 2005, according to ATTOM Data Solutions, the new parent company of RealtyTrac.

Banks started on the public foreclosure process on 36,863 residential properties nationwide in July, a decrease of 5% from last month and 19% from last year.

While the drop in foreclosures can be tied to many different economic factors, the main reason is the jobs market, Fannie Mae Economist Orawin Velz said, according to the article.

From the article:

Velz says one of the most common reasons people fall behind on mortgage payments is unemployment.

“If you lose your job, it doesn’t take much to stop paying your mortgage,” she says.

The jobs market improved over the past several months, posting higher-than-expected gains each month.

Total non-farm payroll employment increased by 255,000 in July, far above what experts predicted, and by 287,000 in June, according to a report from Bureau of Labor Statistics.

This chart shows the correlation of the jobs market and foreclosures over time.

Click to Enlarge


(Source: Fannie Mae)

That being said, the national delinquency rate increased 5% in July, the first rise above 4.5% since February, according to a report by Black Knight Financial Services.

Other sources, such as S&P Dow Jones Indices and Experian also reported an increase in mortgage delinquency in July.  

Does this mean we will see a shift in the jobs market? If these delinquencies turn into foreclosures, it might.