{"id":180830,"date":"2025-02-05T16:28:25","date_gmt":"2025-02-05T23:28:25","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=180830"},"modified":"2025-02-05T16:29:32","modified_gmt":"2025-02-05T23:29:32","slug":"six-million-americans-are-late-on-mortgage-payments","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/six-million-americans-are-late-on-mortgage-payments","title":{"rendered":"Over 6 Million Americans Are Late on Their Mortgage Payments\u2014Here’s What It Means for Investors"},"content":{"rendered":"\n

Another housing crisis could be imminent. According to a new study from Deeds.com, as reported in<\/span> Newsweek<\/span><\/a><\/em>, over 6 million Americans are late on their mortgage payments, as <\/span>reported<\/span> on Jan. 27. The study <\/span>was collated<\/span> from the U.S. Census Bureau’s Household Pulse Survey data. <\/span><\/p>\n\n\n\n

The combination of high interest rates from adjustable-rate mortgages and increasing insurance costs\u2014often bundled into the monthly payment\u2014has <\/span>had a<\/span> devastating financing effect for many homeowners. In addition, increased rents have resulted in 9.4 million renters struggling to make their monthly payments.<\/span><\/p>\n\n\n\n

Mississippi had the highest number of late payments, with 15% of homeowners behind on their mortgages. Illinois was second, with 13.92% late, but according to the study, 24% of renters were delinquent on their payments to their landlord. Delaware also had <\/span>a combined<\/span> 14% of homeowners and tenants behind on their payments. <\/span><\/p>\n\n\n\n

Inflation Has Outpaced Paychecks<\/span><\/h2>\n\n\n\n

S. Shepherd, a real estate expert from deeds.com, told <\/span>Newsweek<\/span><\/em>:<\/span><\/p>\n\n\n\n

“This <\/span>really<\/span> shows how tough things are for <\/span>a lot of<\/span> people right now. Even though jobs are out there, wages haven’t kept up with how expensive everything, especially housing, has gotten. <\/span>Inflation is outpacing paychecks, and <\/span>for many families,<\/span> it only takes one unexpected expense to fall behind.<\/span> It’s a clear sign that while the economy might look strong on paper, not everyone’s feeling that recovery, and housing is where it’s hitting hardest.”<\/span><\/em><\/p>\n\n\n\n

Many Homeowners Are Forgoing Insurance<\/span><\/h2>\n\n\n\n

The New York Times<\/span><\/a><\/em> reported that many homeowners <\/span>who do not have their<\/span> mortgages and insurance bundled into one payment have been reducing their monthly costs by forgoing paying for insurance.<\/span> This<\/span> is particularly prevalent in areas affected by climate change. <\/span><\/p>\n\n\n\n

According to data from the National Association of Insurance Commissioners and Federal Insurance Office at the U.S. Department of the Treasury, cancellation rates were highest in coastal areas in the Carolinas, including <\/span>Hilton Head<\/span><\/a>, <\/span>Charleston<\/span><\/a>, and <\/span>Myrtle Beach<\/span><\/a>, which <\/span>are exposed<\/span> to hurricanes. They were also high in parts of West Virginia, Arizona, and California.<\/span><\/p>\n\n\n\n

As we have seen in <\/span>California with the recent wildfires<\/span><\/a>, damaged uninsured homes are prime targets for investors looking for teardowns to rebuild on or for <\/span>flippers<\/span><\/a>. <\/span><\/p>\n\n\n\n

Insurance and Taxes Surpass Mortgage Payments for Many Homeowners<\/span><\/h2>\n\n\n\n

According to the <\/span>Wall Street Journal<\/span><\/a><\/em>, escalating homeowners costs are the highest they have ever been <\/span>in comparison<\/span> to mortgage payments. In September 2024, homeowners paid an average of 32% of their monthly payments to insurance and <\/span>property taxes<\/span><\/a> on single-family homes. That percentage is higher for homeowners who have <\/span>paid<\/span> a substantial <\/span>amount of their<\/span> mortgage. <\/span><\/p>\n\n\n\n

Increasing home prices have contributed to upward spirals in taxes, while climate change and natural disasters have done the same for insurance. In five major metro areas\u2014<\/span>Rochester<\/span><\/a> and <\/span>Syracuse<\/span><\/a>, New York; <\/span>Omaha, Nebraska<\/span><\/a>; <\/span>New Orleans<\/span><\/a>; and <\/span>Miami<\/span><\/a>\u2014at least a quarter of borrowers spend more than half their monthly mortgage payment on taxes and insurance.<\/span><\/p>\n\n\n\n

Increasing costs of homeownership have had a devastating effect on delinquencies, contributing to the 6.6 million number quoted in the <\/span>Newsweek <\/span><\/em>article. The jump in home insurance premiums between mid-2022 and mid-2023 led to an additional 149,000 mortgages becoming delinquent, according to Stephanie Johnson, an assistant professor of finance at Rice University, who has contributed to a recent<\/span> working paper<\/span><\/a> by researchers at New York University, Rice, and the Federal Reserve Bank of Dallas. <\/span>The worst hit has been <\/span>FHA mortgages<\/span><\/a>, <\/span>which are<\/span> often favored by borrowers with poor credit and low down payments.<\/span> <\/span><\/p>\n\n\n\n

How Investors Should Approach Mortgage Delinquencies<\/span><\/h2>\n\n\n\n

Mortgage delinquencies do not necessarily translate into more deals for investors because delinquent homes have not yet gone into <\/span>foreclosure<\/span><\/a>. However, it <\/span>is a sign<\/span> that more foreclosures might be on the horizon. <\/span><\/p>\n\n\n\n

Foreclosure numbers have been trending up. According to recent data from real estate analytics company ATTOM Solutions, end-of-year foreclosure numbers were up, particularly in<\/span> Florida, New Jersey, and Nevada<\/span><\/a>. However, <\/span>overall<\/span> foreclosures were down by 6% in 2024 over the previous year. <\/span><\/p>\n\n\n\n

Moving from delinquency to foreclosure is not usually a fast process. States with the longest average time to foreclose in Q4 2024 were:<\/span><\/p>\n\n\n\n