NEW YORK (Reuters) - Rising unemployment continues to make more Americans miss their mortgage payments, a negative sign for the U.S. housing market that has lately enjoyed strong data on sales, prices and mortgage applications.
Among U.S. homeowners with mortgages, a record 7.32 percent were at least 30 days late on payments in July, up from about 4.5 percent a year earlier and 7.23 percent in June, according to monthly data from the Equifax credit bureau (EFX.N).
The rate of subprime mortgage delinquencies rose to 39.48 percent from 39.25 a month earlier, though it is still below levels reached earlier this year, according to the data obtained exclusively by Reuters.
Mortgage delinquencies are driven by three factors, two of which appear to be solved or at least improving, said Dann Adams, president of U.S. Information Systems for Equifax.
First, loose underwriting standards are largely a thing of the past, now that lenders demand higher credit scores and are more careful to verify income. Second, home prices are stabilizing, or even rising, in some U.S. markets, which puts less pressure on home owners.
But the third factor, unemployment, remains a worry.
“Even if it’s in the 200,000 to 400,000 (job losses) a month range, it will be a driver of these delinquency rates,” Adams said. “Until unemployment starts to flatten out and begin to return to hiring, these numbers will probably continue to push up.”
Mortgages are more likely to be delinquent in parts of the United States where the housing bubble was biggest, and underwriting standards were the loosest, such as Florida, Nevada and California; delinquency rates are less acute in parts of the Midwest and on the East Coast.
The mortgage data come against a backdrop of an improving housing market, whose health is considered critical to any U.S. economic recovery.
Sales of new single-family homes rose more than expected in July. Home prices were up in June, from May, in 18 of 20 metropolitan areas tracked by the Case-Shiller index, a monthly measure of U.S. home prices.
Applications for loans to buy a home rose for a fourth straight week, according to the Mortgage Bankers Association.
Demand has been helped in part by an $8,000 government tax credit for new home buyers that is to expire in November.
Some home builders, meanwhile, have reported increases in signed contracts for the first time in years, such as Toll Brothers Inc (TOL.N), which reports quarterly results on Thursday.
Against that backdrop, rising delinquencies suggest U.S. housing is not yet out of the woods.
Early-stage delinquencies are a leading indicator of future bankruptcy filings, and Equifax’s July data suggest bankruptcies will continue rising in coming months.
Bankruptcy filings were up 35 percent in July compared with a year earlier, accelerating from both June and May.
Still, while more Americans are late on their mortgage payments, they seemed to be keeping up with credit card bills.
The proportion of bank cards at least 60 days past due was down for the fourth straight month in terms of units, and down for the second straight month in dollar terms. Equifax said this reflects both tight underwriting standards by card companies and consumers cutting back on their spending.
The number of new cards issued in the first half of the year, at 14.7 million, is down 39 percent from the same period in 2008, and those cards are now likely to go only to “prime” consumers with high credit scores.
“It is definitely a prime play right now,” Adams said.
Separately, Equifax said it saw a huge increase in credit inquiries from auto dealers this month, in response to the cash-for-clunkers program.
“It will be interesting to see the underwriting standards put on that volume of new cars,” Adams said. “We’ll be watching that portfolio over the next three to six months.”
Auto delinquency rates rose for the third straight month in July and are up about 13 percent over last year, to 0.75 percent. Subprime auto delinquencies, at 3.19 percent, are also up for three months running.
Meanwhile, student loan delinquencies are also up, partly reflecting graduates’ difficulty in landing jobs after college.
Reporting by Nick Zieminski; editing by Leslie Gevirtz