According to the S&P/Experian Consumer Credit Default Indices, four of the five cities the companies studied through May reported declines in default rates for the second straight month. Overall, default rates were 0.88 percent in May, which is down nine points from April. The default rate on first mortgages also dropped nine points to an all-time low of 0.74 percent, while defaults on second mortgages fell to their own historical low of 0.42 percent, a one-point drop from April.
The Dallas market made the biggest month-to-month headway with a 20-point drop in default rates from April to May. That drop gave Dallas its all-time low default rate of 0.70 percent.
New York and Miami posted their second consecutive decreases. New York reported a historical low of 0.95 percent, down 15 points, while Miami’s three-point drop gave the city a 1.17 percent default rate. Meanwhile, Chicago reported its third consecutive decrease, posting a default rate of 1 percent, down five points from April.
The only increase‒‒and for the third straight month‒‒occurred in Los Angeles, where default rates jumped five points to 0.95 percent.
David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said the decrease in default is expected to continue for the foreseeable future. The Federal Reserve reported that consumer wealth was at a peak in the first quarter of 2015 and consumers are spending, he said. As for the housing sector, Blitzer said, “The combination of low debt service and economic expansion should ease worries about the fallout some fear when the Federal Reserve boosts interest rates.”
Blitzer was especially bullish about the recovery in Miami, which was crippled by debt and default when the crisis hit. The figures from Miami and Los Angeles, despite the uptick in default rates there, are still excellent and have bettered pre-crisis numbers, he said.
“These figures are another indication that housing is recovering,” Blitzer said. “Moreover, other data on financial difficulties confirm that foreclosures are declining and consumers’ capability and willingness to borrow are improving.”