A Little More Today than Yesterday! Trading Stuff.
Loan Delinquencies Cast More Doubt on the Economic Recovery
Zachary Scheidt submits:
Tuesday, the American Bankers Association issued a report which showed rising loan delinquencies on several installment loan categories for the first quarter. While that information shouldn’t be all that surprising given the climate of the first quarter, investors quickly hit the “sell” button sending the S&P 500 down roughly 2% for the day. The report painted a very disturbing picture and while the actual statistics only covered the first quarter, the commentary certainly applied to current market trends which is why the market responded so sharply.
According to the report, unemployment is the largest contributor to loan delinquencies, which are defined as loans with payments more than 30 days past due. Particularly hard hit were home equity loans which rose nearly a half percent to 3.52%. The deadly combination of falling home prices with weak employment means that many consumers are simply unable to keep up with these obligations. This is particularly disturbing since for most consumers, the house is one of the last obligations that consumers will allow to lapse. According to James Chessen, Chief Economist for the American Banker Association, “Even if home prices stop falling later this year, unemployment will keep home equity delinquencies high for some time.”
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