Asset Management & Market Research

Q4 2013 increase in household debt the most since 2007

The NY Fed reported this morning that aggregate consumer debt increased in the fourth quarter by $241 billion, the largest quarter to quarter increase seen since the third quarter of 2007. Americans borrowed to buy homes and cars and to pay for education, according to a survey by the Federal Reserve Bank of New York. Apart from the details In the report, these 3 take-aways struck us as important:

  • “After a long period of deleveraging, households are borrowing again,” Wilbert van der Klaauw, senior vice president and economist at the New York Fed, said in a statement.
  • Total indebtedness remains 9.1 percent below the peak of $12.68 trillion in the third quarter of 2008, according to the New York Fed.
  • Foreclosures are at the lowest levels since the end of 2005.

Here’s a graph released by the NY Fed that show the long term trend in household debt:

HH DEBT 1

Here are come of the details from the report:

As of December 31, 2013, total consumer indebtedness was $11.52 trillion, up by 2.1% from its level in the third quarter of 2013. The four quarters ending on December 31, 2013 were the first since late 2008 to register an increase ($180 billion or 1.6%) in total debt outstanding. Nonetheless, overall consumer debt remains 9.1% below its 2008Q3 peak of $12.68 trillion.

Mortgages, the largest component of household debt, increased 1.9% during the fourth quarter of 2013. Mortgage balances shown on consumer credit reports stand at $8.05 trillion, up by $152 billion from their level in the third quarter. Furthermore, calendar year 2013 saw a net increase of $16 billion in mortgage balances, ending the four year streak of year over year declines. Balances on home equity lines of credit (HELOC) dropped by $6 billion (1.1%) and now stand at $529 billion. Non-housing debt balances increased by 3.3%, with gains of $18 billion in auto loan balances, $53 billion in student loan balances, and $11 billion in credit card balances.

Delinquency rates improved for most loan types in 2013Q4. As of December 31, 7.1% of outstanding debt was in some stage of delinquency, compared with 7.4% in 2013Q3. About $820 billion of debt is delinquent, with $580 billion seriously delinquent (at least 90 days late or “severely derogatory”).

Delinquency transition rates for current mortgage accounts are near pre-crisis levels, with 1.48% of current mortgage balances transitioning into delinquency. The rate of transition from early (30-60 days) into serious (90 days or more) delinquency dropped, to 20.9%, while the cure rate – the share of balances that transitioned from 30- 60 days delinquent to current –improved slightly, rising to 26.9%.

About 332,000 consumers had a bankruptcy notation added to their credit reports in 2013Q4, roughly flat compared to the same quarter last year.

Here’s a graph showing delinquencies:

TOTAL DELINQUENCIES BY TYPE

 



Author: Kevin Lane

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