In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Tuesday, November 25, 2014

NY Fed: Household Debt increased in Q3 2014, "Deleveraging process has ended"

by Calculated Risk on 11/25/2014 11:00:00 AM

Here is the Q3 report: Household Debt and Credit Report. From the NY Fed:

Aggregate household debt balances increased slightly in the 3rd quarter of 2014. As of September 30, 2014, total household indebtedness was $11.71 trillion, up by 0.7% from its level in the second quarter of 2014, an increase of $78 billion. Overall household debt still remains 7.6% below its 2008Q3 peak of $12.68 trillion.

Mortgages, the largest component of household debt, edged up by 0.4%. Mortgage balances shown on consumer credit reports stand at $8.13 trillion, up by $35 billion from their level in the second quarter. Balances on home equity lines of credit (HELOC) dropped by $9 billion (1.7%) in the third quarter and now stand at $512 billion. Non-housing debt balances increased by 1.7 %, boosted by gains in all categories. Auto loan balances increased by $29 billion; student loan balances increased by $8 billion; credit card balances increased by $11 billion.

New extensions increased for auto loans and credit cards, but were roughly flat for both mortgages and HELOCs. There were $105 billion in new auto loan originations, the highest volume since 2005Q3. The aggregate credit card limit continued to increase, and is up by 0.9% from the previous quarter. Mortgage originations, which we measure as appearances of new mortgage balances on consumer credit reports and which include refinanced mortgages, increased slightly to $337 billion but remain low by historical standards. HELOC limits were flat, down by 0.4%.

Overall delinquency rates were flat overall in 2014Q3 As of September 30, 6.3% of outstanding debt was in some stage of delinquency, compared with 6.2% in 2014Q2. About $732 billion of debt is delinquent, with $506 billion seriously delinquent (at least 90 days late or “severely derogatory”).
emphasis added
Total Household Debt Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased slightly in Q3.  Household debt peaked in 2008, and bottomed in Q2 2013.

The recent increase in debt suggests households (in the aggregate)  deleveraging is over.  Also from the NY Fed: Household Debt Balances Increase as Deleveraging Period Concludes
Total cash flow from mortgage debt and nonmortgage debt combined (black dotted line) has turned slightly positive during the past four quarters, ending a five-year period of negative values, suggesting that, by this measure, the deleveraging process has ended; households have begun to use credit to supplement their cash flow again.
Delinquency Status The second graph shows the percent of debt in delinquency. The percent of delinquent debt is generally declining, although there is still a large percent of debt 90+ days delinquent (Yellow, orange and red). 

The overall delinquency rate increased slightly to 6.3% in Q3, from 6.2% in Q2.   However the slight increase was in the less than 30 day category, and is not a concern.

The Severely Derogatory (red) rate has fallen to 2.18%, the lowest since Q1 2008.

The 120+ days late (orange) rate has declined to 1.82%, the lowest since Q2 2008.

Short term delinquencies are back to normal levels.

Here is the press release from the NY Fed: New York Fed Report Shows Household Debt Edges Higher

There are a number of credit graphs at the NY Fed site.