In June 2024, mortgage delinquencies surged to their highest point in six months, raising concerns among some analysts. The national delinquency rate rose by 14.5% from May to June, as reported by Intercontinental Exchange Inc. (ICE). This increase, however, may not be as dire as it appears, with experts attributing the rise to calendar-related factors rather than a significant uptick in borrower distress.
One of the main factors contributing to the surge in delinquencies is that June ended on a Sunday. This timing led to mortgage payments made on the last day of the month not being processed in time for inclusion in the data, thus rolling over into the following month. As a result, this calendar quirk temporarily inflated the delinquency rate, even though borrowers may have made their payments on time.
Additionally, delinquencies had been at historically low levels in May, which made the June increase seem more dramatic in comparison. According to Andy Walden, vice president of research and analysis at ICE, “June’s spike in mortgage delinquencies was primarily calendar related … In fact, our McFlash Dash daily mortgage performance data shows that we’re already seeing some recovery from the jump at month’s end.”
Despite the increase, the number of properties beginning the foreclosure process actually fell by 6.2% in June. Foreclosures were at their lowest levels since the end of the COVID-era moratoriums, and 34% lower than pre-pandemic levels.
Other Signs of Consumer Stress
While the June delinquency spike seems to be a temporary anomaly, there are other indications of growing consumer financial stress. Reports show that many Americans are struggling to keep up with various debt payments. According to VantageScore, early-stage mortgage delinquencies, auto loan delinquencies, and credit-card delinquencies all saw increases in May 2024. Notably, delinquency rates were highest among younger and lower-income consumers, who have been hit hardest by inflation and rising interest rates.
The persistent pressures of high living costs have also been evident in retirement savings trends. A report from Vanguard highlighted that 39% of people who took hardship withdrawals from their 401(k) accounts in 2023 did so to avoid foreclosure or eviction, an increase from 31% two years earlier. This suggests that more consumers are tapping into their retirement savings to cover immediate housing-related expenses.
Looking Forward
Although the rise in mortgage delinquencies in June appears to be largely a result of data collection anomalies, the broader economic environment still warrants caution. As interest rates continue to rise, there may be more pressure on consumers, particularly in the second half of 2024. While the uptick in delinquencies is not yet indicative of a major housing crisis, it’s important to monitor these trends closely in the coming months, especially as rising unemployment and further economic pressures could affect mortgage performance and broader consumer debt.