Consumer debt falls, housing market continues to rise

Recent reports show that consumer debt is falling, further proof that the economy is working its way back to a full recovery.

With tightening credit standards being paired with a struggling economy, many Americans have been having difficulty working toward their dream of one day owning their own home. However, recent reports show that a positive turn is beginning to take place.

According to the latest Quarterly Report on Household Debt and Credit released by the Federal Reserve Bank of New York, consumer debt declined in the third quarter. This was due in large part to nationwide decreasing mortgage debt.

Specifically, consumer debt now stands at about $11.31 trillion. This is 0.7 percent below last quarter and continues a downward trend of almost four years.

Mortgage delinquencies – when a borrower is past due on a monthly payment – are also decreasing, stated the report, and foreclosures are beginning to slow down. In the third quarter, 5.9 percent of mortgages were 90 or more days delinquent, down from 6.3 percent in the second quarter.

With these numbers, consumer confidence could begin to grow. Lenders should ensure that they are prepared for any influx in requests for loans. Investing in mortgage loan software will be highly beneficial. Furthermore, delinquency rates could also be pushed further down when an amortization calculator is used, ensuring that monthly payments are within borrowers' abilities.

While consumer debt is lowering, the most recent report from Trulia said that the housing market is also accelerating forward and is now 47 percent of the way back to normal – compared with 25 percent in October 2011.

"In October 2012, all three housing measures improved – construction starts increased again, existing-home sales rose, and the delinquency [plus] foreclosure rate dropped considerably," Jed Kolko, chief economist at Trulia wrote in a recent Forbes article. "Even though construction and sales declined month-over-month in the Northeast region, stronger activity in the rest of the country outweighed the impact of Hurricane Sandy."