By Sarah Chaney
American home equity has recently recovered, but much of this household wealth is more likely to be held by older, high-credit-score borrowers less exposed to financial shocks.
Homeownership among younger borrowers and Americans with lower credit scores has been on the decline, as tight lending standards have made it difficult for them to tap credit, new research from the Federal Reserve Bank of New York shows. Household wealth has thus moved away from this group.
"An increased amount of available home equity should make the household balance sheet more resilient in the event of a financial shock, though that may not be an option for lower-credit-score borrowers," said Andrew Haughwout, senior vice president at the New York Fed.
In 2006, 13% of borrowers who extracted equity were over 60. In 2017, 28% of borrowers were over 60.
The findings come alongside the New York Fed's household debt report, which shows American households carried $13.21 trillion in debt in the first quarter, up 0.5% from the fourth quarter.
While household debt has been rising for five years, it is growing at a slower rate than in other cycles, as mortgage debt -- which accounts for the bulk of household debt -- has been increasing at a slower clip. Overall mortgage balances remain below prerecession levels.
Americans are mostly keeping up with their debt payments. The share of debt considered to be seriously delinquent, meaning payment is at least 90 days late, dropped to 3.11% in the first quarter from 3.12% in the fourth quarter, and 3.37% in the first quarter of 2017, the New York Fed said.
The delinquency rate of mortgages continued to improve. Delinquency on credit cards rose slightly, with 8% of balances 90 or more days delinquent as of March 31. Delinquency on auto loans edged higher in the first quarter.
The New York Fed's quarterly report on household debt and credit is based on data from the credit-ratings firm Equifax.
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