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Over 6 Million Americans Are Behind on Mortgage Payments—What It Means for Investors
A potential housing crisis could be looming. According to a recent Deeds.com study reported by Newsweek on January 27, over 6 million homeowners in the U.S. are currently behind on their mortgage payments. This data, sourced from the U.S. Census Bureau’s Household Pulse Survey, highlights growing financial distress in the housing market.
With rising mortgage rates, increasing insurance premiums, and inflation outpacing wages, millions of Americans are struggling to keep up with housing costs. Additionally, 9.4 million renters are also finding it difficult to meet their monthly payments. These trends raise important questions about the future of the real estate market and potential investment opportunities.
Which States Are Seeing the Most Mortgage Delinquencies?
While mortgage delinquencies are widespread, some states are experiencing higher-than-average late payment rates:
- Mississippi: Leads the nation, with 15% of homeowners behind on their mortgage.
- Illinois: 13.92% of homeowners are late on payments, with an additional 24% of renters behind on rent.
- Delaware: 14% of homeowners and renters are struggling to meet their payments.
These numbers indicate a growing affordability crisis, particularly in regions where housing costs have surged faster than incomes.
Why Are Mortgage Delinquencies on the Rise?
- Inflation Is Outpacing Wages
Despite a strong labor market, many Americans aren’t feeling the economic recovery. S. Shepherd, a real estate expert from Deeds.com, explains:
“Even though jobs are out there, wages haven’t kept up with how expensive everything—especially housing—has gotten. Inflation is outpacing paychecks, and for many families, it only takes one unexpected expense to fall behind.”
As a result, homeowners and renters alike are struggling with monthly housing costs.
- Rising Insurance and Tax Costs
Homeowners’ insurance premiums and property taxes have skyrocketed in recent years, often outpacing the actual mortgage payments.
- In September 2024, insurance and property taxes accounted for an average of 32% of total monthly housing costs for single-family homeowners.
- In Miami, New Orleans, Omaha, Rochester, and Syracuse, at least 25% of homeowners spend over half their mortgage payment on just taxes and insurance.
- Higher home values have led to property tax increases, while climate-related disasters have driven insurance rates to record highs in states like California, Florida, and the Carolinas.
For many homeowners, these extra costs push their finances over the edge—leading to missed mortgage payments and increased risk of foreclosure.
- Homeowners Skipping Insurance to Cut Costs
In areas prone to hurricanes, wildfires, and floods, many homeowners are choosing to drop their insurance policies to save money.
According to data from the National Association of Insurance Commissioners and the U.S. Department of the Treasury, cancellation rates are highest in:
- Coastal South Carolina (Charleston, Hilton Head, Myrtle Beach)
- West Virginia
- Arizona
- California
Uninsured homes in disaster-prone areas are prime targets for investors, especially for flippers and developers looking for properties to rebuild or renovate.
Are Foreclosures on the Horizon?
Delinquencies vs. Foreclosures
While 6.6 million homeowners are behind on mortgage payments, this doesn’t automatically mean foreclosures will spike immediately.
Foreclosures have been rising, but the process takes time:
- In 2024, overall foreclosures were down by 6% compared to 2023, according to ATTOM Solutions.
- However, foreclosures increased in key states like Florida, New Jersey, and Nevada.
States With the Longest Foreclosure Timelines
Some states have lengthy foreclosure processes, delaying the impact of delinquencies on the housing market:
- Louisiana – 3,015 days (over 8 years!)
- Hawaii – 2,505 days
- New York – 2,099 days
- Wisconsin – 1,989 days
- Nevada – 1,750 days
On average, foreclosures take less than a year in most states, meaning investors should closely monitor the market over the next 6-12 months.
How Real Estate Investors Can Navigate This Market
Mortgage delinquencies present opportunities for investors, but waiting for foreclosures might not be the best strategy. Instead, investors should:
- Target Delinquent Homeowners Before Foreclosure
Rather than competing for foreclosed homes at auction, investors can proactively reach out to homeowners who are behind on their mortgage and offer a solution.
How to Find Delinquent Properties:
- County Public Records: Check for mortgage liens, defaults, and pre-foreclosure filings at the county clerk’s office.
- Tax Delinquency Lists: Websites like Ownerly.com and ExactData.com provide mortgage and tax delinquency data for a fee.
- Driving for Dollars: Instead of mass mailing homeowners, visit distressed properties in person and build relationships with owners.
Many struggling homeowners would rather negotiate a deal with an investor than go through a lengthy foreclosure process.
- Offer a “Win-Win” Deal to Homeowners
If a homeowner is behind on payments, they are already in a difficult financial position. A fair offer that allows them to move on without ruining their credit can be mutually beneficial.
Possible win-win strategies include:
Flexible move-out dates to give homeowners time to relocate.
Fast cash closings with no contingencies.
Creative financing options, such as leasebacks or seller financing.
Many homeowners prefer working directly with an investor rather than losing their home in foreclosure.
- Consider Tax Lien Investments
Tax lien certificates can be a low-risk investment with strong returns.
- When homeowners fail to pay property taxes, the local government sells tax lien certificates to investors.
- If the owner redeems the property, you earn interest on your investment.
- If they don’t pay, you can foreclose on the property—often at a steep discount.
Every state has different rules for tax lien investing, so do your due diligence before bidding.
- Sheriff Sales and Foreclosure Auctions
Once properties go into foreclosure, they are often sold at sheriff sales or auctions.
Pros of Buying at Auction:
Potential to purchase below market value.
Access to properties that banks want to offload quickly.
Cons of Buying at Auction:
Houses are sold as-is—no inspections.
Due diligence is critical to avoid buying a money pit.
Cash is often required for auction purchases.
For experienced investors, foreclosure auctions can be a goldmine—but they require careful research.
Final Thoughts
The rising number of mortgage delinquencies is a warning sign for the housing market. While it doesn’t guarantee another crash, it suggests that foreclosures could rise in 2024 and 2025.
For real estate investors, this presents opportunities to acquire distressed properties—but waiting for a flood of foreclosures might not be the best strategy. Engaging with delinquent homeowners before foreclosure can yield better deals and create win-win solutions.
What are your thoughts on the rise in mortgage delinquencies? Are we heading for a housing crisis? Let us know in the comments!
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“
Over 6 Million Americans Are Behind on Mortgage Payments—What It Means for Investors
Has the U.S. Housing Market Finally Begun to Thaw After the Pandemic?
It seems like the housing market might be showing signs of life. According to a recent report from Redfin, pending home sales in early October have seen their largest year-over-year rise since 2021, with a 2% increase in the four weeks ending October 6.
This news is likely to be welcomed by real estate investors who have felt the market has offered limited opportunities over the past few years. However, it’s important to take a cautious approach—one promising statistic doesn’t necessarily indicate a broader trend.
Is the Housing Market Truly Recovering?
Let’s explore the different factors at play.
Interest Rate Reductions: A Critical Factor or a Red Herring?
The Redfin report links the surge in pending sales to the Federal Reserve’s much-anticipated rate cut announcement in mid-September. According to Redfin, this announcement prompted buyers to re-enter the market in late September, despite mortgage rates having already been falling for weeks before the cut.
This psychological boost is crucial. Although buyers were aware of the falling rates beforehand, many seemed to be waiting for a formal signal to act. This could be attributed to a lingering fixation on the ultra-low rates of 3% to 4% that buyers enjoyed before 2022.
Any rate cut announcement serves as a nudge for prospective buyers, making them feel that now might be the right time to purchase, even if mortgage rates had been decreasing already. In an unstable mortgage market, such announcements hold significant influence.
However, mortgage rates are just one piece of the puzzle when analyzing housing market performance. As noted by Investopedia, the real estate market is driven by four primary factors: interest rates, demographics, economic conditions, and government policies.
Demographics: Shaping the Market
During the pandemic, demographic shifts had a profound effect on U.S. real estate, with major population movements like the Sunbelt migration fueling booms in cities such as Phoenix and Austin, which later became unaffordable for many.
Age is another key demographic factor, and the millennial generation’s pent-up demand continues to be a driving force behind the rise in home purchases. Despite the challenges of the past few years, millennials who have longed to become homeowners are now entering the market in greater numbers, as more properties become available.
Rising Inventory: A Sign of Stabilization
A key factor contributing to the market’s stabilization is the growth of housing inventory over the last year. The pandemic had a significant impact on the availability of homes, with sellers hesitant to list properties due to COVID-19 restrictions and, later, higher mortgage rates.
Some homeowners, particularly those upgrading to larger homes, found it financially challenging to sell and take on higher mortgages. Others, however, simply chose to wait for a more favorable market.
Although the latest Realtor.com report shows that inventory remains down by 23.2% compared to pre-pandemic levels, we are seeing an upward trend. For instance, new listings have been rising since last year, with a 5.7% year-over-year increase for the four weeks ending October 6.
As of September 2024, some states have even surpassed their pre-pandemic inventory levels, including Tennessee, Texas, and Idaho, with others, like Washington, close behind.
Vulnerabilities in Certain Regions
However, not all regions are showing positive signs. For example, some areas, particularly those affected by extreme weather, have seen inventory spikes not because of market recovery, but due to homeowners trying to offload damaged properties they can’t afford to repair.
For instance, regions like Florida and North Carolina, hit by hurricanes, have experienced increases in home listings, but these may reflect a response to climate-related challenges rather than market health.
Opportunities for Investors
Investors should be discerning when choosing markets, focusing on regions where inventory is growing due to increased home construction rather than climate-related distress. States like Idaho, Utah, North Carolina, and Texas, which are building new homes, offer potential, though caution is needed in areas prone to natural disasters.
The Midwest and Northeast, meanwhile, still face significant challenges in recovering to normal market conditions. These regions have lower rates of new construction, meaning inventory remains scarce, which could present both opportunities and difficulties for investors.
The Bottom Line
The U.S. housing market is showing signs of recovery, but the situation remains complex and varies by region. Interest rates play an essential role in unlocking the market, but investors should also consider other critical factors, such as homebuilding trends, climate risks, and government policies. While the market is heading in the right direction, it’s crucial to examine regional differences carefully before making investment decisions.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“