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By Kathleen M. Howley

May 28 (Bloomberg) — Mortgage delinquencies and foreclosures rose to records in the first quarter and home-loan rates jumped to the highest since March as the government’s effort to revive the housing market lost momentum.

The U.S. delinquency rate climbed to a seasonally adjusted 9.12 percent and the share of loans entering foreclosure rose to 1.37 percent, the Mortgage Bankers Association said today. Both figures are the highest in records going back to 1972. Fixed rates rose to 4.91 percent, Freddie Mac said. New home sales fell 34 percent from April 2008, the Commerce Department said.

The three-year housing slump is proving resistant to efforts by the Federal Reserve and the Obama administration to lower rates and keep homeowners from failing on their mortgages. One in every eight Americans is now late on a payment or already in foreclosure as mounting job losses cause more homeowners to fall behind on loans, the MBA said.

“If people don’t have a paycheck they can’t support a mortgage,” Jay Brinkmann, the MBA’s chief economist, said in an interview. “The longer the recession lasts the more people run through their savings reserves, leading to higher delinquencies and higher foreclosures.”

Rates Rise

The average rate for a 30-year loan jumped to 4.91 percent from 4.82 percent a week earlier, Freddie Mac, the McLean, Virginia-based mortgage buyer, said today in a statement. The rate was 5.1 percent at the beginning of the year.

The unemployment rate rose to 8.1 percent in the first quarter, the highest since the end of 1983, according to the Bureau of Labor Statistics. Sales of new homes increased 0.3 percent to an annual pace of 352,000, lower than forecast, after a 351,000 rate in March, the Commerce Department said.

The inventory of new and old defaults rose to 3.85 percent, the MBA said today. Prime fixed-rate mortgages given to the most creditworthy borrowers accounted for the biggest share of new foreclosures at 29 percent, and prime adjustable-rate mortgages were 24 percent, Brinkmann said. It shows the mortgage problem has shifted from a subprime issue to a job-loss problem, he said.

Delinquencies are continuing to rise even as forecasts show the economy may start improving later this year. The U.S. economic recession probably will end in the third quarter, a survey of business economists showed yesterday, even as rising joblessness indicates the recovery will be weaker than previously estimated. The world’s largest economy will begin to expand next quarter, according to 74 percent of economists in a National Association for Business Economics survey.

Home Sales

Home sales may reach a bottom by mid-year, according to 72 percent of the panelists, and more than six in 10 predicted housing starts will hit a trough by that time. The survey showed home prices have further to fall, with 40 percent of the respondents forecasting that declines will continue into 2010 or later.

Home resales in the U.S. gained in April as foreclosure auctions enticed bargain hunters, Chicago-based National Association of Realtors said yesterday. Purchases increased 2.9 percent to an annual rate of 4.68 million from 4.55 million in March, the trade group said. The median price slumped 15 percent from a year earlier, the second-biggest drop on record, and distressed properties accounted for 45 percent of all sales.


The Realtors said in a May 12 report foreclosures dragged down the first-quarter median U.S. price by 14 percent to $169,000 from a year earlier, the biggest decline on record.

The U.S. median home price tumbled 9.5 percent last year, the most ever recorded, according to the Realtors’ group. That’s more than six times the 1.4 percent drop in 2007, the first decline in the national median since the 1930s.

This year, prices probably will fall 4.9 percent before posting a 4.4 percent gain in 2010, according to Lawrence Yun, the trade group’s chief economist. Sales of previously owned homes probably will rise 1.1 percent this year, the first gain since the end of the five-year real estate boom in 2005, Yun said.

To contact the reporter on this story: Kathleen M. Howley in Boston at [email protected].
Last Updated: May 28, 2009 10:29 EDT

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