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Consumer debt declined in the third quarter, largely due to decreasing mortgage debt throughout the nation, according to the latest Quarterly Report on Household Debt and Credit released by the Federal Reserve Bank of New York.

After decreasing by $74 billion in the third quarter, consumer debt now stands at about $11.31 trillion. This is 0.7 percent below last quarter and continues a downward trend of almost four years.

Mortgage balances make up the bulk of household debt but are on the decline as well. After a 1.5 percent decline over the third quarter, Americans hold $8.03 trillion in mortgage debt.

Home equity lines of credit also declined, falling by $16 billion or 2.7 percent over the quarter.

While mortgage debt is declining, other categories of debt rose 2.3 percent over the same quarter.

Mortgage delinquencies, however, are also declining, and foreclosures are slowing.

In the third quarter, 5.9 percent of mortgages were 90 or more days delinquent, down from 6.3 percent in the second quarter.

Delinquency rates for home equity lines of credit did not improve over the quarter, but neither did they decline. They remained constant at about 4.9 percent.

Foreclosures slowed by about 5.5 percent over the third quarter with about 242,000 new foreclosures showing up on credit reports during the three-month period.

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Consumer Debt Continues to Fall

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The share of distressed properties is shrinking and home prices are rising, but first-time homebuyers aren’t benefiting from the improvements, according to findings from a survey.

In the most recent Campbell/Inside Mortgage Finance HousingPulseTracking survey, the first-time homebuyer share for home purchases was found to be 34.7 percent in October. The figure is a decrease from 37.1 percent in June and the lowest share in the survey’s three-year history.

The decrease coincides with a significant rise in purchases for non-distressed properties.

HousingPulse data revealed the share of purchases for non-distressed properties rose to 64.7 percent in October, an increase from 55.7 percent in February. The October share for non-distressed property purchases was also the highest level HousingPulse has recorded.

While non-distressed property purchases have increased, first-time homebuyers have become less active in the non-distressed property market.

The share of non-distressed property home purchases from first-time homebuyers is down to 33.6 percent in October from 38.7 percent in June.

The survey highlighted two key factors to explain the decrease in non-distressed property purchases from first-time homebuyers.

One has to do with higher prices for homes that are not in distress.

The second reason is the lack of available financing for first-time homebuyers. The lack of options leave many first-time homebuyers dependent on FHA for financing since FHA loans require a lower down payment and have less strict underwriting requirements.

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Lack of Distressed Properties

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The Federal Housing Finance Agency (FHFA) reported home prices continued to climb higher in September, with prices gaining by 0.2 percent from August.

On the same day Tuesday, the Case-Shiller Indices posted a similar monthly increase of 0.3 percent.

FHFA’s house price index (HPI) also revealed a quarterly price gain of 1.1 percent from the second to the third quarter. Compared to the third quarter last year, prices rose 4 percent.

The agency stated the monthly index has increased for eight straight months now.

“With significant growth in home prices during the quarter and a modest inventory of homes available for sale, house price movements in the third quarter were similar to what we observed in the spring,” said FHFA Principal Economist Andrew Leventis.

Yet, even with the consistent price gains, Leventis added, “a number of factors continue to affect the recovery in home prices such as stagnant income growth, high unemployment levels, lingering uncertainty about the macroeconomy, and the large number of homes in the foreclosure pipeline.”

On a quarterly basis, the index also found price increases for 39 states. States that saw significant quarterly increases included 
Delaware (+5.8 percent), Arizona (5.4 percent), and Nevada (+4.2 percent).

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FHFA's Index Register Price Increases

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Hiring in the mortgage industry increased in Q3 for the fifth straight quarter, according to Mortgage Daily’sMortgage Employment Index.

The index shows 8,711 hires were made in the year’s third quarter, up more than 3,000 from the last quarter and nearly 3,500 from Q3 2011. Even with an estimated 5,785 layoffs, the industry saw a net increase of nearly 3,000 jobs—more than double the gain in Q2.

For 2012’s first three quarters, mortgage and real estate finance companies recruited 7,230 more people than they’ve laid off.

The boost in employment comes at a time when many of the largest lenders and servicers are cutting staff. According to Mortgage Daily’s data, JPMorgan Chase saw the most downsizing, reducing its mortgage staff by 2,123 in Q3. Aurora Bank took second-to-last place, cutting 922 jobs, while Bank of America held the third-worst position with approximately 700 fewer mortgage staff.

Those losses were offset by growth at Quicken Loans Inc.(which expanded its mortgage staff by 2,500), Wells Fargo & Co. (which added 2,043 positions), and Nationstar Mortgage LLC (which saw a net gain of 600 jobs).

State-by-state, Michigan showed the most mortgage employment growth, aided mostly by additions to Quicken’s staff in Detroit. The state reported 1,442 new positions in Q3—and no layoffs.

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Mortgage Industry Sees More Job Gains