Americans Resume Deleveraging Household Balance Sheets

American households have resumedrnwhat is now nearly a five year effort to decrease their debt. The Household Debt and Credit Report for thernfirst quarter of 2013 released today from the Federal Reserve Bank of New Yorkrnnoted that outstanding household debt declined approximately $110 billion inrnthe quarter compared to the fourth quarter of 2012.  The decline was due primarily to reductionsrnin mortgage and credit card debt.</p

Household debt was at 11.23 trillionrnin the first quarter, down 1.0 percent from the previous quarter and well belowrnthe peak of $12.68 trillion it reached in the third quarter of 2008.  Outstanding mortgage debt was $7.93rntrillion, down from $8.03 trillion in Q4 2012 and HELOC balances fell $11rnbillion to $552 billion.  Overallrnmortgage debt peaked in Q3 2008 at $9.9 trillion. </p

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“Afterrna temporary deceleration in the previous quarter, the data suggest thatrnhousehold deleveraging has resumed its previous trajectory,” said Wilbert vanrnder Klaauw, senior vice president and economist at the New York Fed. “We’llrnlook to see if this pace of debt reduction and delinquency improvements willrnpersist in upcoming quarters.” </p

Mortgage delinquency rates fell to 5.4 percent</bfrom 5.6 percent and HELOC delinquencies from 3.5 percent to 3.2 percentrnquarter-over-quarter.  In anotherrnpositive development, the share of 30 to 60 day delinquent mortgages thatrntransitioned to improved from 28 percent in the fourth quarter to 35 percent inrnthe first while only 1.6 percent of previously current balances moved intorndelinquent status compared to 1.8 percent in the fourth quarter.  Also positive was a decline for the fourthrnconsecutive quarter in numbers of individuals who had new foreclosure notations</badded to their credit reports; down 12.5 percent to 184,000.</p