In December 2012, 1.9% of Americans were more than 30 days past due on their mortgages, 1.8% were behind on their credit card payments and 0.9% were delinquent on automobile loans, according to TransUnion's survey of consumers with mortgage, auto loan and credit card payments. Though delinquencies have been declining in all three categories, they have fallen most sharply in mortgages over the last three years as fewer borrowers walk away from their homes.
"Things are getting back to normal," says study co-author Steve Chaouki, group vice president in Transunion's financial services business unit. "For the first time since the housing bubble burst, consumers are valuing their mortgage payments as much as their credit cards."
Mortgage delinquency rates track closely with the housing market's collapse and gradual recovery, the study found. The report compared year-over-year changes in Standard and Poor's Case-Shiller 20-City Home Price Index with the difference between credit card and mortgage delinquency rates.
In January 2009, when the home price index plummeted 34 points from the same period the year before, the difference between mortgage and credit card delinquencies was just 40 basis points. By December 2009 mortgage delinquencies had caught up with the grim realities of the housing market and the spread widened to 100 basis points. Among consumers with credit card, mortgage and car debt, 3.8% were at least 30 days behind on their mortgages, 2.8% were delinquent on credit card loans and 1.3% were past due on car loans.
The delinquency spread has dwindled steadily as home prices have improved. It finally reached a low of 0.1% in December 2012 as the home price index posted a 9.5-point increase.
The correlation between delinquency rates and house prices is even more pronounced in the areas most hobbled by the real estate crisis. Las Vegas experienced a whopping 35.8-point decline in house prices between January 2009 and December 2012. It had a 700-basis-point delinquency spread for that period—the highest of all cities included in the study. Hard-hit Miami and Phoenix both had delinquency spreads of 500 basis points or more.
"Consumers who were underwater on their mortgages were willing to lose their homes and start over rather than risk losing their cars, for example," Chaouki says.
"Auto values stayed very high [throughout the crisis]," he adds. "People also kept their cars longer, which gave them even more equity in their vehicles. So you got to a point where, if you had to, you could sell the car for more than you owed. You wouldn't want to go delinquent; you'd want to pocket that money."
Overall, the study's results suggest that both lenders and borrowers can expect a brightening credit market as delinquencies continue to taper off, Chaouki says. "All three credit categories are good or getting better."
The TransUnion study evaluated the credit performances of 48 cohorts of 20 million consumers between January 2008 and December 2012. Each consumer had a mortgage, auto loan and credit card open and in good standing at the point at which they entered the study. TransUnion then measured delinquency rates one year later.