As credit delinquencies rise, housing is not at 2008 stress levels

Credit card and auto-loan stress is presented as more severe for renters than for homeowners. Federal Reserve credit delinquency data is cited as a reason to question claims that credit markets signal a repeat of 2008. Homeowners are described as benefiting from bankruptcy reform and Qualified Mortgage rules, which are said to have improved credit outcomes over the past 15 years. FICO scores, cash-flow measures tied to payment ability, and utilization-based scoring are described as strongest in that period. Student loan stress is described as long-standing since 2010 and not linked to a surge in housing inventory, because many delinquencies involve borrowers with relatively low balances. Falling savings rates are acknowledged, but housing listing data since 2013 is described as showing no seller stress.

"One of the questions I often get which is a valid one is why the Federal Reserve ignores the financial stress in the auto loan and credit card data. Last year, the Fed wrote this article to give people a view on credit delinquency data. Again, I believe some people still believe the credit market or the credit data is pointing toward another 2008, a topic that I recently debunked. At live events, I say that we see stress in renters' finances more than in homeowners' financial. In essence, that has always been the case."

"Because of the 2005 bankruptcy reform law and the 2010 Qualified Mortgage regulation, homeowners on paper have never looked better. The FICO score data, cash-flow snapshots tied to making credit and auto loan payments, and scoring on their utilization rates with debt, has never been better in the past 15 years. A lot of people also point to student loan stress. Well, we have had student loan stress since 2010, and it has never created a surge in housing inventory."

"This is because most student loan delinquencies are from college dropouts whose loan balances average less than $14,000. We've had many takes on credit card and auto loan delinquencies this week. With the savings rate falling to a yearly low of 2.6% and with the 12-month average savings rate at 4% it might make it seem like it's housing 2008 all over again. But it's not: Homeowners are in fine spot and the new listing data since 2013 has never shown seller stress."

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