Affordable Homes and Fewer Delinquencies Benefit Housing Market

By Kyle Chezum Updated on 2/15/2011

2/15/11

While the job market continues to flounder and forecloses continue to add up, housing is becoming more affordable.  Prices are dropping in many major markets and have reached levels unseen in the past decade in some areas.  Unfortunately, this doesn’t bring the eventual recovery of the housing sector any nearer.  It does make homes more affordable, though, even despite rising mortgage rates.

The good news?  Fewer option ARM loans are defaulting than expected.  Data released over the past year led to the expectation that most ARM loan would end up delinquent early in 2011.  This hasn’t been the case.  Thanks to historically low interest rates, many homeowners with ARM mortgage have managed to continue making payments on their loans.

All told, fewer option ARMs have defaulted this year than expected.  This has helped ease the negative effects of additional defaults on the mortgage industry.  Besides low interest rates, another factor contributing to the reduced delinquency rate is the high delinquency seen during 2010.  Essentially, more ARMs went into default during 2010 than expected, and as a result, there are fewer left to default now.

This isn’t great news, but the overall effect of this trend has been positive.  With homes becoming more and more affordable and fewer mortgages set to default than expected, 2011 may not be as bad a year as previously thought for the housing market.