Large credit rating agency Equifax believes that the rate at which mortgage delinquencies have been rising has moderated and may have found a bottom. According to Reuters, “While the year-over-year increase is dramatic, the pace of sequential increases has slowed, said Dann Adams, president of company’s U.S. Information Systems.”
Mathematicians will never extrapolate from one point of data. It gives them no chance to chart a direction. Equifax is looking at the change from April to May which may mean very little.
Analysts are succumbing to the temptation to see every piece of economic information that is not abysmal as positive. The Equifax figure shows that delinquencies in May rose 58% from the same month last year. That they were only down modestly from April means almost nothing. It is still only one piece of data which is not supported by any trend.
Delinquencies are actually likely to keep rising because of their tendency to track unemployment and wages. A number of economists still see joblessness rising from the current level of 9.4% to a number well above 10%. The double- digit figure may be part of what credit payment rates face for several quarters.
It is still unlikely that the ability of people, on average, to make timely home payments, credit card payments, and car payments is going to sharply improve any time soon. That cannot happen with so many people out of work.
Douglas A. McIntyre
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