Economy Watch: Residential Mortgage Delinquencies Slide

Residential mortgage delinquencies saw a decrease; the president of the Kansas City Fed warns of a farm bubble; and e-commerce is jumping.

By Dees Stribling, Contributing Editor

The Mortgage Bankers Association reported on Thursday that the mortgage delinquency rate for residential properties of up to four units decreased to 8.22 percent as of the end of the fourth quarter of 2010. That’s a decrease of nearly a percentage point–91 basis points–from the third quarter of 2010, and a decrease of 125 basis points from 4Q09. The delinquency rate includes loans that are at least one payment past due, but does not include loans in the process of foreclosure.

The serious (sheriff-at-your-door) delinquency rate, meaning the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.57 percent, a decrease of 13 basis points from last quarter, and a decrease of 110 basis points from the fourth quarter of last year. Foreclosures themselves were up a bit quarter-to-quarter, says the MBA. The percentage of loans actually in the foreclosure process at the end of 4Q10 was 4.63 percent, up 24 basis points from the third quarter, but up onlya scant five basis points from one year ago.

“These latest delinquency numbers represent significant, across-the-board decreases in mortgage delinquency rates in the U.S.,” Jay Brinkmann, MBA’s chief economist, says in statement. “Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession.”

The farmland bubble

What, another property bubble? Federal Reserve Bank of Kansas City President Thomas Hoenig, notable dissenter from many recent Fed policies, told the Senate Agriculture Committee on Thursday that farmland is the next big bubble, and that it will do the U.S. economy no good when it pops.

“My nagging concern remains that current distortions in financial markets are increasing the risk that imbalances in asset markets will catch agriculture–and the U.S. economy more generally–by surprise once again,” he told the committee, using central-banker-speak to describe a popping property bubble. He added that farmland prices in his district, which includes Kansas and Nebraska, are now 20 percent higher than this time last year (the Chicago Fed recently reported a year-over-year increase in Midwest farm valuations of 12 percent).

“This run-up in farmland values has occurred … amid financial markets characterized by high levels of liquidity and unusually low interest rates,” Hoenig continued, citing the demon rum of easy money as the probable bubble-making force. “It is nearly impossible to determine how much of the farmland boom may be an unsustainable bubble … and how much results from fundamental changes in demand and supply conditions.”

E-commerce sales spike in 4Q10

The U.S. Department of Commerce reported on Thursday that e-commerce sales were considerably up in 4Q10 compared with the same quarter in 2009–$44 billion vs. $38 billion. Total sales online for all of 2010 were $165 billion.

As a total of all retail sales, that’s still a relatively small number, accounting for about 4.3 percent. Still, only 10 years ago–when online retailing was the next big thing–the entirety e-commerce accounted for only about 1 percent of all retail sales.

Wall Street was in fine fettle on Thursday, with the Dow Jones Industrial Average gaining a meaty 91.5 points, or 0.75 percent. The S&P 500 advanced 0.31 percent, and the Nasdaq was up 0.21 percent.

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