N.Y. Fed: U.S. Household Debt Declines in 2Q13

Mortgage & Real Estate

The Federal Reserve Bank of New York said American consumers outstanding household debt in the second quarter declined by $78 billion from the previous quarter.

According to the quarterly Household and Credit Report, based on data from the banks Consumer Credit Panel, total household indebtedness fell to $11.15 trillion, which is a 0.7% decrease from 1Q13. The second quarter figure is also 12% below the $12.68 trillion peak experienced during the third quarter of 2008.

A decline in housing-related debt was a main reason for the drop, the New York Fed said.

Mortgages, the largest component of household debt, fell $91 billion on a quarterly basis and now stand at $7.84 trillion. The regional Federal Reserve Bank cited reporting gaps associated with the servicing transfer of a higher-than-usual number of loans for the mortgage drop.

Meanwhile, balances on home equity lines of credit decreased by $12 billion, or 2.2%. HELOCs have $540 billion of household debt.

The bank reported that mortgage originations rose to $589 billion in 2Q13, the seventh straight quarterly increase.

Additionally, the percent of 90 or more day delinquent balance for all household debt fell quarter-over-quarter from 6.1% (1Q13) to 5.7% (2Q13). Furthermore, every individual component of household debt had its delinquency rate decline from the first quarter: mortgage delinquency debt is now 4.9% from 5.4%, the HELOC delinquency rate is 3% from 3.2%, credit card debt rate is 10% from 10.2%, and student loan debt rate at 10.9% from 11.2%.

Households improved their overall delinquency rates for the seventh straight quarter, an encouraging sign going forward, said Andrew Haughwout, vice president and research economist at the New York Fed.

Although overall debt dropped in the second quarter, households did increase nonhousing debt, led by rising auto loan balances. Total auto loan balances were up $20 billion from the previous quarter, the largest increase in seven years. This also marks the ninth consecutive increase on a quarterly basis.

Over the last nine quarters, auto loan debt has grown $108 billion and has surpassed the $800 billion mark for the first time in about five years.

The report also revealed that credit card balances increased $8 billion to $668 billion and outstanding student loan debt rose by $8 billion to $994 billion.

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