Although the housing market seems to be stabilizing, the numbers for October leave plenty of room for improvement. Whether you’re measuring the ability of homeowners to continue making payments or the ability of builders and sellers to move inventory that’s on the market, both areas raised plenty of concerns in October. The housing market is a major element of the economy and economic recovery from the recession can’t come without at least some cooperation from the housing market.

There are a number of interesting headlines that have been released this week regarding the housing market in October.

Delinquencies: For the ninth straight quarter, a new record was established for the number of delinquencies in the housing market. To be considered delinquent, a homeowner must either be at least one payment behind or already in foreclosure. As of the end of October, 9.64% of homeowners had received at least one notice related to the delinquent status of their loan and 4.74% of homeowners were in the foreclosure process. In other words, more than 14% of homeowners are in real trouble when it comes to their mortgage loan.

Problem States: The problems in the housing market aren’t limited to any one state, but there are certainly states where the issues seem to be concentrated. As of the end of October, 43% of all the foreclosures in the country were located in California, Nevada, Arizona, or Florida. These are all markets that saw rapid price appreciation in real estate during the first half of the decade and have seen home values collapse over the past few years. Florida is currently the biggest contributor to foreclosure statistics, where 13% of homeowners are currently in foreclosure.

Prime vs. Subprime: It’s natural to think that most of the problems related to foreclosures are probably related to subprime borrowers who shouldn’t have qualified for loans in the first place. However, for the first time ever, the number of delinquencies among prime borrowers exceeds the number of delinquencies among subprime borrowers. A year ago subprime borrowers accounted for 35% of the new foreclosures and they accounted for only 16% in October. A third of the new foreclosures in the third quarter came from prime borrowers with fixed-rate mortgages, so this is not just a subprime and adjustable-rate mortgage problem anymore.

Shadow Inventory: As of the end of October, there are now more homes in some state of delinquency than there are homes for sale in the real estate market today. The idea of a shadow inventory is that banks are sitting on huge inventories of property that will need to hit the market and be sold eventually. As this inventory makes its way to the market, home prices are going to be under a new level of pressure which could perpetuate the cycle of growing delinquencies. For example, recent numbers for the Los Angeles area show just over 62,000 homes listed for sale, while banks are sitting on an inventory of nearly 89,000 homes that are in foreclosure. At some point, this inventory will need to be sold.

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