While our paychecks aren’t growing fast and the economy isn’t booming, consumers in the Buffalo Niagara region still are doing a pretty good job paying their bills on time.
New data from the Federal Reserve Bank of New York shows that loan delinquency rates here, while higher than they were before the recession, are, on average, significantly lower than the rest of the country.
In fact, the number of consumers who are 90 or more days late on their payments for any type of loan or had a balance in collections within the past month is about 13 percent lower than the national average.
Consumers in the Buffalo Niagara region are doing an especially good job keeping up with their auto loan and student loan payments.
The risk of local consumers falling behind on their home equity loan payments is virtually nil, while the pool of borrowers who have fallen behind on their credit card payments is roughly 13 percent below the national average.
The lone weak spot in the loan delinquency data is with mortgages, where the local delinquency rate is 7 percent higher than the national average.
“Consumers in the Buffalo-Niagara metro area are performing somewhat better on their debt compared to the rest of the U.S.,” said to Claire Kramer-Mills, a Fed assistant vice president.
“Fewer consumers are seriously delinquent or in collections,” she said. “Average balances are lower in Buffalo than what we see nationwide, but on par with borrowers in Syracuse and Rochester.”
But the solid showing in bill paying isn’t entirely due to the conscientiousness of local consumers, the Fed researchers said. Part of it is the tighter credit standards that were put in place for all kinds of borrowing during the recession.
Those restrictions made it tougher for consumers with poor or marginal credit to get conventional mortgages, credit cards or auto loans. By narrowing the pool of borrowers to those with better credit scores, lenders have pushed higher-risk consumers out of the debt market and lowered delinquency rates in the process.
That doesn’t mean the Buffalo Niagara region has been immune from the pain of the rising debt loads that households took on since the turn of the century, according to previous Fed research.
The latest data also shows that while delinquency rates have come down from their post-recession peaks, they still haven’t returned to their pre-recession lows in most cases.
And overall, there still is a sizeable chunk of local consumers who are having trouble keeping up with their payments. The Fed researchers found that 17.3 percent of local consumers were at least 90 days late on one or more loans or had at least one debt in third-party collection during the past year. But that’s still better than the 19.9 percent overall delinquency rate nationally.
Here’s a closer look at the consumer debt trends in the Buffalo Niagara region:
• Mortgage loans – This is the one weak spot in the local consumer debt market. The average borrower’s $103,700 in mortgage debt is 44 percent less than the national average of $185,500, the Fed researchers found.
That makes sense, considering the median sale price of existing homes locally during the fourth quarter of last year was 39 percent below the national median, according to the National Association of Realtors.
Still, delinquencies have been creeping up, with 3.1 percent of borrowers considered to be seriously delinquent on their loans during the fourth quarter, slightly above the national average of 2.9 percent.
But the national delinquency rate and the local one are going in the opposite direction. The U.S. rate has been more than cut in half since it topped 6 percent during the height of the national housing crisis in late 2009.
But the local delinquency rate, which never spiked because our housing market held steady during the recession, has been steadily creeping higher, topping 2 percent in late 2008 and hovering around 3 percent for most of the last three years.
Fed researchers said they think the divergent trends are due to New York’s slower foreclosure process, which runs through the courts, while faster-moving foreclosure systems used elsewhere have allowed bad loans to be written off faster across the country.
Home equity loans remain a very safe bet for lenders. The 0.6 percent delinquency rate here is just a third of the nationwide 1.8 percent rate.
• Auto loans – The average borrower in the Buffalo Niagara region owes $13,400 on their car loan, which is 22 percent less than the national average.
And while the delinquency rate on those local auto loans spiked during the second half of last year to at least a 12-year high of 4.8 percent, that’s 31 percent lower than the 7 percent of car loans nationally that are more than 90 days past due.
• Credit cards – The $5,300 average balance we’re carrying on our credit cards is just 1 percent below the national average, but we’re doing a better job of keeping up with our payments.
The local delinquency rate, which was around 10 percent as recently as late 2010, is down to 7.4 percent, and that’s just about the lowest it’s been since at least 2002 – which is as far back as the latest Fed data goes.
• Student loans – While swelling student loan debt is a growing problem both here and across the country, borrowers in the Buffalo Niagara region are doing a better job keeping up with their payments.
The 12.5 percent delinquency rate on student loan debt is 23 percent lower than the national average of 16.2 percent, even though the average balance of $28,000 is just about 1 percent below the national average.
The big picture: Western New Yorkers have long had a reputation for playing things pretty close to the vest when it comes to their personal finances. We clip coupons. And because our housing market has been pretty stable, we view our homes as a place to live, rather than an investment.
Decades of hard economic times tend to do that.
And in this case, that’s a good thing.