Here is a shocker…..in spite of rising stock and bond markets and the supposed V shape recovery more and more families continue to go 90 days or more delinquent on their mortgages.  As you can see in the chart below since June of 2007 delinquencies have risen every single month. (Click on chart twice to enlarge)

Freddie Mac Delinquencies

To put this into perspective let’s drill down into the numbers a bit.The historic average delinquency rate for non-credit enhanced is .71% and the current reading is 2.88%.  The historic average rate for credit enhanced is 2.81% and the current reading is 7.84%.  The historic average rate for total is 1.08% and the current reading is 3.72%.  And finally the historic average rate for multi-family is .04% and is currently at .14%.  In case you haven’t noticed the current reading on each of these is anywhere from 2.8 to 4.08 times their historic average.

This is just one of the indicators pointing to further weakness in residential real estate.    One potential trade that we are following is that of shorting IYR.  For now we are just stalking it as it continues to move higher but we expect that in the next one or two months the reality will once again hit home and investors will start paring off some of their gains as the underlying fundamentals do not justify current prices let alone higher ones.

Happy Trading,

Dave@TheMacroTrader.com

Disclaimer-The Macro Trader currently holds no positions in housing related stocks.

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