Better to be able to have a credit card than to own a home. TransUnion reports in a new study that the percentage of people current on their credit cards but delinquent on their mortgages rose to 6.6% in the third quarter, up from 6.3% in the second, according to Reuters.
One conclusion that might be drawn from the data is that people are willing to lose their homes rather than face a loss of access to credit.
In a perverse way, the trend makes sense. Homeowners can leave their houses and rent. People without access to credit cut themselves off from most forms of consumer spending unless they have large sums of cash. As more people lose their jobs, having a reserve of credit against which they can borrow has a particularly high value.
The results of the TransUnion figures are another blow to the notion that home prices and foreclosure rates will improve. A new study from First American CoreLogic says that 5.1 million homeowners will have homes worth 75% or less than their mortgages by June.
Federal officials, banks, and home builders have recently become more optimistic about the housing market based on the belief that low mortgage rates and the chance that the economy will create new jobs this year will revive home sales. Those trends will almost certainly be undermined by rising foreclosures, which RealtyTrac believes will reach three million this year, and the reluctance of buyers to enter a market in which home values may still be falling.
The housing market recovery is only a mirage.
Douglas A. McIntyre