National Real Estate - Mortgage Debt Falls to Lowest Level Since 2006, NY Fed Survey Says



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Mortgage Debt Falls to Lowest Level Since 2006, NY Fed Survey Says

 
With borrowers paying back their mortgages at a faster pace, mortgage debt hit a six-year low in the third quarter.

Tuesday, December 11th, 2012


With borrowers paying back their mortgages at a faster pace, mortgage debt hit a six-year low in the third quarter, according to the Federal Reserve Bank of New York.

The New York Fed's Quarterly Report on Household Debt showed that mortgage debt declined $120 billion to $8.03 trillion. Additionally, home-equity lines of credit were down $16 billion, despite a rise in mortgage originations.

"Consumers seeing their balance sheets recovering are getting more confident," U.S. economist at BNP Paribas Yelena Shulyatyeva told Bloomberg. "Deleveraging is still a headwind because people want to lower their debt, instead of putting it into consumption."

As a whole, household debt was down 0.7 percent in the third quarter, with the drop in mortgage debt outpacing increases in auto, student loan and credit card debt. Auto debt was up $18 billion, while student loan debt increased $42 billion and credit card balances jumped $2 billion.

Even with these bumps, Americans have cut their debt by $1.37 trillion from the peak seen in the third quarter of 2008.

Increases in originations, debt signals confidence
While taking on more debt could be viewed negatively, it can also be sign that consumers are becoming more confident about their personal finances.

"The increase in mortgage originations, auto loans and credit card balances suggests that consumers are slowly gaining confidence in their financial position," said senior economist at the New York Fed Donghoon Lee. "As consumers feel more comfortable, they may start to make purchases that were previously delayed."
 
This could bode well for sales of Florida homes, as residents of the Sunshine State could be more inclined to take advantage of record low mortgage rates to get into the home buying market.

According to Freddie Mac's latest Primary Mortgage Market Survey, 15- and 30-year fixed-rate mortgages both hit new lows in the week ending November 21. Fifteen-year FRMs averaged 2.63 percent, well below last year's average of 3.3 percent, while the average rate for 30-year FRMs came in at 3.31 percent.

With mortgage rates at new record lows, and consumers feeling more confident about their financial standing, Floridians could help spur the state's housing market. This potentially could help prevent the market from entering a seasonal trough.

National real estate trends have a major impact on the real estate market on a daily basis. Keeping up-to-date on the latest news and notes posted by GL Homes can make sure those looking for South Florida homes know exactly how the current market will affect them.