October 3, 2008

Home foreclosure rates past and present.

There is a LOT of talk right now about high home foreclosure rates. From how bad some people make it sound, it seems as if every other home owner in the country right now must be currently in foreclosure. Currently the foreclosure rate is around 2.8%. That is a historical high. How high is that really compared to previous decades?

This FDIC report from 1998 has data on foreclosure rates from previous decades. That document has foreclosure rates listed for 1950 to 1997 in the appendix.

Foreclosure rates for 1950 to 1997:

If you look at the period from 1970 to 1998 you can see that the foreclosure rates had gradually increased over those 3 decades. The FDIC article also has some interesting discussion on the why foreclosure rates have increased gradually over the years. Interestingly they don't find a strong correlation between unemployment rates or interest rates and the foreclosure rate. So in other words the foreclosure rate didn't seem to go up directly in relation to high unemployment or high interest.

Another document from the Federal Reserve in St. Louis looks back at the foreclosure rates around the great depression.

They give foreclosure rates for the years 1926 to 1941 :
You might look at this data and conclude that the problem right now is worse than the great depression. But the report points out that the delinquency rate on mortgages in the 1930's was much much higher than it is now: "Thus, at the beginning of 1934, approximately one-half of urban houses with an outstanding mortgage were in default (Bridewell, 1938, p. 172). For comparison, in the fourth quarter of 2007, 3.6 percent of all U.S. residential mortgages and 20.4 percent of adjustable-rate subprime mortgages had been delinquent for at least 90 days."

So back in the great depression nearly half the people were behind on their mortgage. Today only around 4% of people are delinquent.

Another interesting report on recent foreclosure rates is from the Clevelend Fed. They show the foreclosure and delinquency rates for both prime mortgages and subprime mortgages. Their data is very revealing about how the current problem is almost entirely with the subprime mortgages.

Here's a chart from that report showing foreclosure starts for prime mortgages in blue versus subprime in red:

Looking at that chart we can see that prime mortgage rates foreclosure rates have been pretty flat for the past decade. Its really the subprime mortgages foreclosure rates that have been high.

Also see:
Some Truth About Historical Foreclosure Rates, Please
Realtytrack report on Q2 2008


  1. I found this post very interesting. Have you looked at foreclosure rate graphed with home ownership rates? My understanding is that home ownership reached new highs in the last few years, I would think foreclosure rates would have followed (but delayed). Also, what about home ownership vs subprime loans? Any relationship?

    Feel free to email me.

  2. Randy, I can find home ownership rates over the decades and plot them versus foreclosure rates. Homeownership has been gradually increasing for the past 40 years or so.

  3. Hi,

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  4. you're terribly mistaken


  5. I don't see how anything I've said here is contradicted as mistaken by that article.

    I wrote this article in October 2008. The numbers have changed since.

    They present a theory that there is a backlog of "hidden" foreclosures to be seen in the future among the delinquent homes. That seems more like common sense to me. Certainly a portion of the delinquent homes will end up in foreclosure. But this doesn't contradict anything I said.



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