The risk of borrower delinquencies jumped 16 percent nationally versus levels recorded one year ago, according to a risk report published by First American CoreLogic, underscoring the continuing trouble confronting many of the nation's key local housing markets. CoreLogic's Core Mortgage Risk Index, which tracks 380 metropolitan markets across the U.S., reached its highest level on record during the first quarter of 2008. CoreLogic said that risk is now 47 percent above the levels recorded during the first quarter of 2002, which served as the tail end of the last economic downturn.
Calif foreclosures March 2008
Click for larger view. (source: First American CoreLogic)
Three things: Prices, prices, and prices First American CoreLogic gauges mortgage risk by assessing both fraud and collateral risk as well as house price appreciation; it said in the report that price declines have "overwhelmed" other factors that drive risk, even swamping rapid gains in measured fraud and collateral risk activity at the MSA level. In Q1 2008, CoreLogic reported that house prices in U.S. metropolitan markets fell, on average, 5.2 percent from a year ago, a rate of decline sharply higher than Q4 2007. As of March 2008, 33 states were experiencing year-over-year house price declines, up from 28 states in February. Of the more than 380 markets tracked in CoreLogic's dataset, 176 are now experience home price declines in March, the company said, up from the 143 reported in Q1 2008. Steep price declines in larger metropolitan markets put borrowers under the gun when they lose a job, get ill, are disabled, face a divorce, are forced to care for an ill loved one; without additional equity to fall back on, many borrowers are finding workouts hard to come by. Not surprisingly, CoreLogic reported that California markets are experiencing the largest price declines, accounting for 16 of the top 20 largest price-decline markets. California and Florida -- once among the two hottest housing markets in the nation -- now account for 42 of the top 50 largest price-decline markets, the company said. Not helping matters is the fact that California's unemployment rate has surged to 6.2 percent as well, according to data from the Commerce Department. The nation's least risky markets? Try looking to Texas: CoreLogic reported that 4 of the nation's ten least risky housing markets were located in the Lone Star state. Disclosure: The author held no positions in FAF when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.