TransUnion forecasts that the U.S. housing market will have fully recovered from the effects of the Great Recession by the end of 2016.
In its 2016 Forecast, the company says it expects consumer credit markets, including the mortgage market, to make a complete recovery.
The firm predicts that the national mortgage serious delinquency rate (60 days or more past due) will reach 2.06% by the end of 2016 – down from 2.50% at the end of this year.
TransUnion says 2.06% is in the range traditionally observed prior to the mortgage crisis.
In comparison, the serious delinquency rate peaked at 6.94% in the first quarter of 2010, according to the firm's data.
‘Our forecast highlights that we are no longer in recovery – we have recovered from the Great Recession,’ says Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit, in a statement. ‘Both the mortgage and credit card markets are performing extremely well, with increased consumer participation and continued low delinquency rates. Millions of borrowers have gained access to credit card loans in just the past few years. And, despite the fact that more consumers – and more nonprime consumers – are entering the housing market, delinquency levels have remained in check and balances are growing. This points to responsible lending practices and a consumer base that is clearly in a better position to make payments on their loans.’
‘We have observed that a 'normal' delinquency rate fell between 1.5 percent and 2 percent in the past, and our forecast puts the nation back at this level,’ adds Steve Chaouki, executive vice president and head of TransUnion's financial services business unit. ‘Newer vintage mortgage loans have been performing at this level for the last few years, but a combination of factors – such as the funneling of bad mortgage loans through the foreclosure process, an improvement in the employment picture and an uptick in housing prices – were needed to get back to normal.’
The report shows that mortgage debt per borrower has increased slightly in recent years, which is partly due to increasing home prices. Debt levels are expected to experience a $9,000-plus gain per borrower by the end of next year from the year-end low observed in 2012.
‘This is a clear indicator that housing prices are recovering and consumers are gaining access to more mortgage loans,’ says Chaouki. ‘Fannie Mae's recent announcement that it would use trended data in the assessment of mortgage applicants could also very well boost mortgage originations in the second half of 2016.’
Previous research from the firm finds that with the use of trended data, the percentage of consumers in the super-prime risk tier would increase from 12% of the population to 21%.
Despite the fact that the housing market is almost fully recovered, the total number of mortgage accounts is far from where it used to be in the pre-recession years. As of the third quarter, there were about 52.6 million mortgage accounts – approximately 7 million fewer than in the third quarter of 2009, when there were 59.6 million.
‘We are a long way from returning to pre-recession levels in terms of mortgage accounts, but changing consumer preferences for housing also may play a role in this slow recovery,’ says Chaouki. ‘If the economy continues to perform well, we believe the net number of mortgages will increase over the next year.’
To view the full report, click here.