Consumers’ Financial Condition

Reports today from the New York Federal Reserve and RealtyTrac shed some new light on consumers’ financial conditions and mortgages. Improvements continue for consumers in the mortgage market; the one weak spot in the NY Fed report was student loans. The NY Fed reports that some 291,000 individuals had foreclosure notations on their credit reports in the first quarter of 2012, roughly the same as in the fourth qurater last year but down 21% from the frist quarter last year.  The proportion of total household debt that was delinquent fell to 9.3% in the first quarter from 9.8% in the 2011 fourth quarter.  New consumer bankruptcies fell 14.3% in the same period.  At the same time, both mortgage debt outstanding and home equity lines of credit continued their declines, down 1% and 2.4% from the previous quarter.  This pattern has been in place for awhile: delinquencies are declining but so is outstanding mortgage debt as home buyers find it difficult to qualify for loans.   Curing delinquencies is essential to a housing recovery, but so are new mortgages.

The RealtyTrac data focus on foreclosures. Nationally 26% of all residential sales in the first quarter were in some stage of foreclosure, roughly the same as the first quarter of 2011.  The average price of foreclosure properties was 27% below the price of non-foreclosure properties. This difference reflects not just the condition of homes, but also location and size.  The last year to the first quarter of 2012 saw a 25% increase in pre-foreclosure sales, including short sales, as well as a 15% drop in sales of bank-owned (REO) sales.   The three states with the highest foreclosure percentages were Nevada, California and Georgia.  In Nevada over half the sales were foreclosures, in California and Georgia it was 47% and 46%.

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