Data from Mortgage Bankers shows that more than one of every eight homes in New Jersey (12.7%) is in serious delinquency, meaning that the borrower is more than 90 days past due on the mortgage. This is the second highest rate in the nation, and is 1.3% higher than the 2011 rate. New Jersey's current default rate now trails only Florida at 17.5% (which is down 1.2% from its 2011 rate). These defaults will ultimately represent homes hitting the for-sale market when the servicing banks decide it's time to cut losses and realize something salvageable on their investment.
This overhang of housing stock supply should cap housing prices, if it doesn't cause a significant decline in housing prices because the supply of for-sale homes may far exceed the market demand for them. This could indicate that -- far from a housing price recovery as predicted by other industry pundits -- a substantial decline in housing prices in New York City, Long Island and New Jersey is on its way.
This Bloomberg News report states that New Jersey has the second-worst serious delinquency rate in the nation. The report further indicates that the pipeline of delinquencies (and predictable, ensuing price depression) is serious in the states of New York, Connecticut, Maine and Pennsylvania. These states are all judicial foreclosure states, meaning the courts must approve bank foreclosures.
Eric Dixon is a New York lawyer and strategist and a member of the Board of Directors of the financial think tank the Financial Policy Council.