Q1 was another quarter in which recent patterns in household debt continued.
As we report every month, non-housing revolving credit balances continue to be flat, although we now have some more granularity, with the Fed adding that the "number of credit inquiries within six months – an indicator of consumer credit demand –declined again the bulk of household leverage driven by non-revolving debt." Specifically, "there were 158 million inquiries in 2013 Q1, down from the 164 million inquiries seen in the previous quarter."
The balance of non-housing debt, and this is the part that is rapidly rising, is in the form of auto and student loans, both of which increase substantially in Q1, 2013, with student debt rising $20 billion to $986 billion, further propelling this debt category as the largest single form of debt, well above car loans which totaled $790 billion, and where $78 billion in newly created loans were issued in the past quarter. Elsewhere, total mortgage debt on consumer credit reports dipped once more, declining $101 billion to $7.93 trillion, while HELOC balances declined by another $11 billion to $552 billion.
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Total average household debt on a per capita basis declined by $790 to $46,270 from $47,060 in the previous quarter, dashing David Rosenberg's visions of long-term growth and a household deleveraging. Naturally, the biggest debt component was Mortgage debt amounting to just under $33,000 for the average American.
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It is not immediately clear how much of the net drop in mortgage balances from $8.033 trillion to $7.932 trillion was due to defaults as opposed to actual pay downs and non-credit rating impairing deleveraging. We do know that a whopping $577 billion in new mortgages were opened in Q1, the highest since Q3 of 2007.
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Which means that some $680 billion in mortgages should have been extinguished in one quarter. If this happened primarily via defaults and discharges, one can only wonder just how the bank balance sheets were not decimated in Q1. As a reminder, half a year ago we observed that the bulk of US mortgage debt reduction has come from defaults [9]not from actual deleveraging.
Last and certainly not least, despite the NY Fed's attempts to make the US credit picture rosier than it is, we learned that a record 14.64% of US consumers are now in "collections" status with their local, friendly credit agency (for an average amount of $1433). Bullish for credit collectors.
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More from the Fed's breakdown of household debt:
Aggregate consumer debt declined in the first quarter, by $110 billion, resuming the longer-term downward trend. As of March 31, 2013, total consumer indebtedness was $11.23 trillion, 1.0% lower than its level in the fourth quarter of 2012. Overall consumer debt remains considerably below its peak of $12.68 trillion in 2008Q3.
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).
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”).
Delinquency transition rates for current mortgage accounts improved during the first quarter of 2013, with 1.6% of current mortgage balances transitioning into delinquency in the first quarter. The rate of transition from early (30-60 days) into serious (90 days or more) delinquency fell noticeably to 22.8%, while the cure rate – the share of balances that transitioned from 30-60 days delinquent to current – improved in the quarter increasing to 34.7%.
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.
Housing Debt
- Originations, which we measure as appearances of new mortgage balances on consumer credit reports, rose to $577 billion. The level of originations has been increasing since bottoming out in the third quarter of 2011.
- About 184,000 individuals had a new foreclosure notation added to their credit reports between January 31 and March 31. Foreclosures are down 12.5% from the previous quarter, the fourth consecutive quarterly decline, and 68% below the peak of 566,000 new forclosures in the second quarter of 2009.
- Mortgage delinquency rates continued to improve in 2013Q1, with 5.4% of mortgage balances 90+ days delinquent, compared to 5.6% in the previous quarter.
- Delinquency rates in Home Equity Lines of Credit dropped again, from 3.5% in 2012Q4 to 3.2% in 2013Q1.
Student Loans
- Outstanding student loan balances increased by $20 billion during the first quarter, to a total of $986 billion as of March 31, 2013.
- The 90+ day delinquency rate on student loans dropped and stands at 11.2%, down from 11.7% in 2012Q42
Credit Cards and Consumer Credit Demand
- Aggregate credit card limits were roughly flat during the quarter
- There are 383 million open credit card accounts, unchanged from 2012Q4.
- Balances on credit cards accounts fell by approximately $19 billion.
- The number of credit inquiries within six months – an indicator of consumer credit demand –declined again. There were 158 million inquiries in 2013Q1, down from the 164 million inquiries seen in the previous quarter.
Auto Loans
- Auto loan originations dropped in the first quarter of 2013. During the first quarter, there were $78 billion in newly
originated auto loans, down 12.3% from the previous quarter. - The percentage of auto loan debt that is 90 or more days delinquent fell slightly to 3.9%.
Full presentation: