by Calculated Risk on 8/29/2012 11:00:00 AM

From the NY Fed: Overall Delinquency Rates Down as Americans Paying More Debt on Time

In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York today announced that delinquency rates for mortgages (6.3 percent), credit cards (10.9 percent), and auto loans (4.2 percent) decreased from the previous quarter. However, rates for student loans (8.9 percent) and home equity lines of credit (HELOC) (4.9 percent) increased from March.

Household indebtedness declined to $11.38 trillion, a $53 billion decline from the first quarter of 2012. Outstanding household debt has decreased $1.3 trillion since its peak in Q3 2008. The reduction was led by a decline in real estate-related debt like mortgages and HELOC. More information about how Americans are paying down their debt is available in our corresponding blog post.

"The continuing decrease in delinquency rates suggests that consumers are managing their debts better," said Wilbert van Der Klaauw, vice president and economist at the New York Fed. "As they continue to pay down debt and take advantage of low interest rates, Americans are moving forward with rebalancing their household finances."

... Mortgage originations, which we measure as the appearance of new mortgages on consumer credit reports, rose to $463 billion.

Here is the Q2 report: Quarterly Report on Household Debt and Credit

Mortgage balances shown on consumer credit reports continued to fall, and now stand at $8.15 trillion, a 0.5% decrease from the level in 2012Q1. Home equity lines of credit (HELOC) balances dropped by $23 billion (3.7%). Household debt balances excluding mortgages and HELOCS increased by 0.4% in the second quarter to $2.6 trillion, boosted by increases of $14 billion in auto loans and $10 billion in student loans.
...
About 256,000 individuals had a new foreclosure notation added to their credit reports between March 31 and June 30, a slowdown of 12% since the first quarter and the lowest number seen since mid-2007. ... Foreclosures are down 55% from its peak in Q2 of 2009, which coincided with the bottom of the recession.

Here are two graphs:

Click on graph for larger image.

The first graph shows aggregate consumer debt decreased in Q2. This was mostly due to a decline in mortgage debt.

However student debt is still increasing. From the NY Fed:

Student loan debt rose $10 billion to $914 billion. ... Since the peak in household debt in 2008Q3, student loan debt has increased by $303 billion, while other forms of debt fell a combined $1.6 trillion.

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).

From the NY Fed:

Overall delinquencies improved in 2012Q2. As of June 30, 9.0% of outstanding debt was in some stage of delinquency, compared with 9.3% at the end of 2012Q1. About $1.02 trillion of debt is delinquent, with $765 billion seriously delinquent (at least 90 days late or “severely derogatory”).

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

by Calculated Risk on 8/29/2012 10:05:00 AM

From the NAR: July Pending Home Sales Rebound

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.4 percent to 101.7 in July from 99.3 in June and is 12.4 percent above July 2011 when it was 90.5. The data reflect contracts but not closings.

The PHSI in the Northeast increased 0.5 percent to 77.0 in July and is 13.4 percent higher than a year ago. In the Midwest the index grew 3.4 percent to 97.4 in July and is 20.2 percent above July 2011. Pending home sales in the South rose 5.2 percent to an index of 111.7 in July and are 15.6 percent above a year ago. In the West the index slipped 1.7 percent in July to 109.9 but is 1.3 percent higher than July 2011.

This was above the consensus forecast of a 1.0% increase for this index and is the highest level in two years (since the expiration of the housing tax credit).

Contract signings usually lead sales by about 45 to 60 days, so this is for sales in August and September.

by Calculated Risk on 8/29/2012 08:47:00 AM

From the BEA:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.7 percent in the second quarter of 2012 (that is, from the first quarter to the second quarter), according to the "second" estimate released by the Bureau of Economic Analysis.

The main revisions were:

PCE was revised up from 1.5% to 1.7% (services were revised up).

Investment was revised down (the contribution to GDP from Change in private inventories was revised from +0.32 percentage points to -0.23 in the second release).

Imports are revised down. PCE prices increased at only 0.7% annualized (same as advance release), and core PCE prices increased at a 1.7% annual rate. Overall these changes are minor and were at expectations. This is still sluggish growth.

by Calculated Risk on 8/29/2012 07:03:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 6 percent from the previous week to its lowest level since May 11, 2012. The seasonally adjusted Purchase Index increased more than 1 percent from one week earlier.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.80 percent from 3.86 percent, with points remaining unchanged at 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index.

The purchase index has been mostly moving sideways over the last two years.

I'm still puzzling over why the MBA index is moving sideways but the recent Senior Loan Officer survey showed "moderately to stronger" demand for mortgages to purchase homes:


Over half the banks surveyed reported moderately to substantially strong demand for mortgage to purchase homes. It isn't clear why the MBA index and the Fed survey results are different.

by Calculated Risk on 8/28/2012 08:37:00 PM

First an excerpt from a research note by Jan Hatzius at Goldman Sachs:

At a minimum, we expect an extension of the forward rate guidance to "mid-2015" at the September 12-13 FOMC meeting. We also expect an eventual return to QE, although in terms of timing we believe that either December or early 2013 is still more likely than September.
...
The tone of the data has clearly improved a bit since the [last FOMC] meeting. ... we estimate that Q3 GDP is on track for a 2.4% annualized gain versus an advance estimate of 1.5% for Q2.

However, a return to QE in September is clearly possible if the upcoming data, especially the August employment report released on September 7, fall short of expectations or if financial conditions tighten again--e.g., in the wake of any disappointment around the European situation and the ECB meeting on September 6.

On Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

• At 8:30 AM, the BEA will release the 2nd estimate of Q2 GDP. The consensus is that real GDP increased 1.7% annualized in Q2, revised up from 1.5% in the advance release.

• At 10:00 AM, the Pending Home Sales Index for August will be released. The consensus is for a 1.0% increase in the index.

• At 11:00 AM, the New York Fed will release the Q2 2012 Report on Household Debt and Credit

• 2:00 PM, the Federal Reserve Beige Book will be released. This is an informal review by the Federal Reserve Banks of current economic conditions in their Districts.


A question for the August economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).