US mort­gage debt lit­tle changed

The China Post - - WORLD BUSINESS -

Amer­i­cans are buy­ing more homes and at higher prices, yet new data shows that mort­gage debt is lit­tle changed.

The U.S. Fed­eral Re­serve Bank of New York said Thurs­day out­stand­ing U.S. mort­gage debt slipped 0.7 per­cent in the April-June quar­ter to US$8.12 tril­lion. That is up slightly from a year ago and about the same level as three years ago when the hous­ing mar­ket bot­tomed.

The sec­ond quar­ter’s de­cline oc­curred even as Amer­i­cans took out more new mort­gages, ei­ther to re­fi­nance old loans or pur­chase homes. New mort­gages to­taled US$466 bil­lion in the sec­ond quar­ter, the most in al­most two years.

Those trends sug­gest Amer­i­cans are pay­ing down mort­gage debt at roughly the same pace as new loans are made, ev­i­dence that home­own­ers re­main wary of hous­in­gre­lated debt.

Over­all, the New York Fed’s re­port in­di­cates that there is lit­tle sign of a re­turn to bub­ble-era ex­cesses in mort­gage fi­nanc­ing, even as the hous­ing mar­ket re­bounds. Wouldbe buy­ers are bid­ding up prices on a scarce sup­ply of avail­able homes. Sales of ex­ist­ing houses climbed to an eight-year high in June.

And home prices rose nearly 5 per­cent in May from a year ear­lier, ac­cord­ing to the S&P/Case-Shiller 20-city in­dex. They jumped 10 per­cent in Den­ver, 9.7 per­cent in San Fran­cisco and 8.4 per­cent in Dal­las — big in­creases that are mak­ing home­own­er­ship in­creas­ingly un­af­ford­able for the typ­i­cal fam­ily in many cities.

Yet there are many signs in the New York Fed’s re­port that hous­ing fi­nance is much health­ier than be­fore the re­ces­sion. Just 95,000 peo­ple re­ceived new fore­clo­sure no­tices in the sec­ond quar­ter, the fewest in the 16-year history of the data.

And in another sign of cau­tion, to­tal bor­row­ing on home-eq­uity lines of credit fell US$11 bil­lion in the sec­ond quar­ter, to US$499 bil­lion. That’s far be­low the peak of US$714 bil­lion six years ago.

The amount of new mort­gages has risen for four straight quar­ters, the New York Fed said, af­ter fall­ing to a 14-year low of US$286 bil­lion in last year’s sec­ond quar­ter.

Sev­eral trends have off­set those in­creases to keep over­all mort­gage debt mostly un­changed, ac­cord­ing to econ­o­mists at the New York Fed. A wave of re­fi­nanc­ing has low­ered bor­row­ing rates, al­low­ing home­own­ers to pay down more prin­ci­pal each month and less in- ter­est. Many home­buy­ers are mak­ing larger down pay­ments. And the pro­por­tion of in­vestors and other buy­ers pay­ing cash has been el­e­vated for most of the eco­nomic re­cov­ery.

Still, the New York Fed’s re­port also re­vealed some of down­sides to re­cent hous­ing trends. It’s still very dif­fi­cult for those with­out ster­ling credit to get mort­gages.

And a smaller pro­por­tion of Amer­i­cans own homes, even as sales have ticked up. Just 63.4 per­cent of Amer­i­cans are home­own­ers, down from 69 per­cent in 2007 and the low­est level in more than four decades.

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