Tuesday, May 14, 2013

NY Fed: Consumer Debt declines in Q1, Deleveraging Continues

by Calculated Risk on 5/14/2013 11:00:00 AM

From the NY Fed: New York Fed Report Shows Americans Continue to Improve Household Balance Sheets

In its latest Household Debt and Credit Report, the Federal Reserve Bank of New York announced that households continued to improve their finances during the first three months of 2013. Outstanding household debt declined approximately $110 billion from the previous quarter, due in large part to a reduction in housing-related debt and credit card balances. Meanwhile, delinquency rates for each form of household debt declined, with about 8.1% of outstanding debt in some stage of delinquency, compared with 8.6% the previous quarter. ...

In Q1 2013 total household indebtedness fell to $11.23 trillion; 1.0% lower than the previous quarter and considerably below the peak of $12.68 trillion in Q3 2008. Delinquency rates improved across the board: mortgages (5.4% from 5.6%), HELOC (3.2% from 3.5%), auto loans (3.9% from 4.0%), credit cards (10.2% from 10.6%) and student loans (11.2% from 11.7%). The overall 90+ day delinquency rate dropped from 6.3% to 6.0% this quarter, below the 8.7% peak from three years ago.

“After a temporary deceleration in the previous quarter, the data suggest that household deleveraging has resumed its previous trajectory,” said Wilbert van der Klaauw, senior vice president and economist at the New York Fed. “We’ll look to see if this pace of debt reduction and delinquency improvements will persist in upcoming quarters.”
emphasis added
Here is the Q1 report: Quarterly Report on Household Debt and Credit
Mortgages, the largest component of household debt, fell in the first quarter of 2013. Mortgage balances shown on consumer credit reports stand at $7.93 trillion, down $101 billion from the level in the fourth quarter of 2012. Balances on home equity lines of credit (HELOC) dropped by $11 billion (2.0%) and now stand at $552 billion. Household non-housing debt balances were roughly flat, with increases in auto and student loans, by $11 billion and $20 billion respectively, offset by decreases in credit card balances ($19 billion) and other consumer loan balances ($10 billion).
About 309,000 consumers had a bankruptcy notation added to their credit reports in 2013Q1, a 16.8% drop from the same quarter last year, and the ninth consecutive drop in bankruptcies on a year-over-year basis.
Here are two graphs from the report:

Total Household Debt Click on graph for larger image.

The first graph shows aggregate consumer debt decreased in Q1.

Although overall debt is decreasing, Student debt is still increasing. From the NY Fed:
Outstanding student loan balances increased by $20 billion during the first quarter, to a total of $986 billion as of March 31, 2013.
Delinquency Status The second graph shows the percent of debt in delinquency. In general, the percent of delinquent debt is declining, but what really stands out is the percent of debt 90+ days delinquent (Yellow, orange and red) - especially the 120+ days delinquent (orange and yellow). 

From the NY Fed:
Delinquency rates continue to show improvements across the board in 2013Q1. As of March 31, 8.1% of outstanding debt was in some stage of delinquency, compared with 8.6% in 2012Q4. About $909 billion of debt is delinquent, with $678 billion seriously delinquent (at least 90 days late or “severely derogatory”).
There are a number of credit graphs at the NY Fed site.