It’s a Good Sign when Homeowners attempt to make Mortgage Payments on time

Posted by Title Source

During the depths of the recession and accompanying
housing market slump, there were a number of disturbing trends that emerged.
Not the least stupefying of those was consumers’ tendency to prioritize their
credit card payments over mortgage payments, a rather baffling decision in
practice but predictable in terms of its contributions to the market’s eventual
collapse.

The number of homeowners carrying delinquent
mortgage payments reached unprecedented levels in 2007 and 2008 and was just
one representation of misguided mentality resulting in economic disaster. The
traditional hierarchy – where homeownership was valued above all else – had
been flipped on its head.
But Americans may be gradually reverting to the old-fashioned ways of
doing things.
“The housing market is undeniably improving,” said

Jason Hall, Title
Source’s National Director of Sales. “Homeowners are starting to feel like
their houses are an investment again, rather than just another monthly expense
with their credit card payments.”

Reevaluated priorities
According to a TransUnion study conducted from 2009 to 2012, the mortgage delinquency rates have steadily
decreased among those who made monthly mortgage, auto and credit card payments
over the last three years.
The most evident correlation to be taken away from
the data is this: When homes regain value, as many gradually have over the past
year, it usually coincides with homeowners making on-time payments. And lately
homeowners, even the ones in financial distress, are making those payments on
time even if it comes at the expense of their credit card.
As recently as 2009, mortgage delinquencies
outpaced those of auto loans by a 3-to-1 ratio. In 2012, the playing field was
something much closer to equal.

So
why did the housing bubble coincide with people putting off their mortgage
payments in favor of making credit card and car payments? And perhaps more
relevant, what does the new trend to make mortgage payments before credit card
payments (although this is not the case with auto loans – consumers are still more
likely to pay this first) mean for the housing market moving forward?

The answer: It’s probably a good sign, but hard to
know for sure. That’s because the post-recession market, with its Federal
support, is both volatile and historically unprecedented.

Moving parts
The first quarter of 2013 saw a spike in refinancing activity as mortgage rates
were held down, in part, by the Federal Reserve bond-buying program. Around
May, interest rates began climbing on the presumption that the program would be
tapered. And then in the month of September, the Fed threw a big, sweeping
curve ball when it announced the program would continue at its current pace.
In other words, while homeowners increasingly
staying up on their mortgages is a good indicator of the housing market’s
revitalization, there are other factors still in play. What will happen to
rates now that the Fed has made its announcement? What level of home
appreciation will we see as 2013 comes to a close? And when will employment
gains actually make serious traction?
A lot is up in the air, but the good news is
that buyers have greater confidence, sellers have more equity and construction
rates are headed up, meaning inventory levels are climbing as prices do. If current
owners maintain their good practice of making mortgage payments on time, then
we may have the final piece to a full-fledged housing recovery.