First American Studies Neighborhood Spread of Delinquency
With the delinquency rates of prime and subprime mortgages trending upward across the nation, individual markets show different patterns of where those delinquencies gather within the city limits. A study by First American CoreLogic examines the spatial distribution of serious mortgage delinquencies across neighborhoods in the 30 largest US cities. Five patterns emerge from the data. Markets such as Las Vegas, Tampa and Sacramento are examples of the delinquency pattern CoreLogic calls "Type 1 ," which is characterized by a high mean delinquency rate above 10% with most of its volume distributed symmetrically around neighborhoods with the highest delinquency rates. This pattern appears to be associated with steep house price drops and reflects overdevelopment or speculative real estate purchases, according to the report. Charlotte, Portland and Seattle fit under the Type 2 pattern, which has a relatively low mean delinquency rate beneath 10%, and the majority of the mortgages are compact with little or none in high delinquency neighborhoods. “These are metropolitan areas that, into the third quarter of 2008 continued to have comparatively healthy housing markets,” according to the report. Type 3 cities include Chicago, Los Angeles and Atlanta, where delinquencies are skewed over a variety of impacted neighborhoods. Here, the maximum delinquency rate exceeds 20%. “Type 3 cities are larger in size, have a more vibrant economy, and generally have had a smaller proportion of subprime,” according the report. Therefore, in these cities, the neighborhoods infected with subprime delinquency and job losses take a smaller share of the entire city’s market, according to the report. Like Type 3 cities, Type 4 markets have a higher volume of delinquencies in neighborhoods with a lower delinquency rate. They are less skewed and more compact, but the maximum delinquency rate swells to 20%. Baltimore, Boston and Washington D.C. are Type 4 cities. Neighborhoods in Type 5 cities such as Cleveland and Detroit have a more even disbursement of highly delinquent neighborhoods that often exceed 20% delinquency rates. Type 5 cities have the largest share of their Zip cods in high delinquency state, according to the report. The report also showed that the national serious delinquency of prime mortgages was 6.02% in June 2009. Florida and Nevada posted the highest rate of 15.05% and 14.05%, respectively. North Dakota’s 1.17% and South Dakota’s 1.77% serious delinquency rates were the lowest in the country. But when the 60-plus day delinquency and serious delinquency trends were plotted against the foreclosure rates, delinquencies were shown to accelerate faster than foreclosures as loan servicers increase loan modifications and other workout efforts and moratoria cap the foreclosure rates. Write to Jon Prior.