New home sales inched up 0.3% m/m to 352,000 in April, below expectations. The report also included annual benchmark revisions that moved new home sales slightly lower at 351,000 in March versus the previous estimate of 356,000. Sales fell 3.8% in the West as builders struggled to compete with the overhang of distressed properties for sale. Sales increased 1.9% in the South and held steady in the Northeast and Midwest. Inventory of homes for sale fell 4.2% to 297,000, roughly half of the inventory at the peak in April 2007. Most of the decline has been in inventory of homes under construction, but over the past several months, inventory of completed homes has started to edge lower. The decline in inventory reduced months supply to 10.1, the lowest since July of last year. The new home market has started the painful process of normalizing owing to aggressive construction cuts.

US mortgage delinquencies and foreclosures reach new record high in 1Q

The Mortgage Bankers Association’s national delinquency report revealed a notable deterioration in mortgage performance across all loan types in 1Q. The share of mortgages 30 days or more delinquent rose to a record high of 9.1% from 7.9% in 4Q (seasonally adjusted). In addition, 3.9% of mortgages were in some stage of foreclosure. As such, more than 12% of borrowers were either delinquent of in the foreclosure process at the end of 1Q (non-seasonally adjusted basis).

The rate of foreclosure starts accelerated to 1.4% in 1Q from 1.1% in 4Q. There has been a notable pickup in foreclosure proceedings for prime fixed-rate mortgages, which now account for the largest share of new foreclosures. On a regional basis, just under half of foreclosure starts were in California, Nevada or Arizona. There was a big jump in foreclosure starts in California to 2.2% from 1.4% in 4Q as temporary foreclosure moratoria artificially depressed foreclosures at the end of last year.

The flood of foreclosures into the housing market will continue to keep inventory elevated, exerting downward pressure on home prices.