Setting The Stage

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48 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS The LaTesT The LaTesT credit risk down to Post-crash low TransUnion's Risk Index falls to its lowest level in nearly 10 years. t ransUnion released its Credit Risk Index (CRI) at the start of March, concluding credit risk dropped at the end of 2013 to the lowest level since 2005. The index dropped to 110.10 in the fourth quarter of 2013, down nearly 9 percent from the 120.64 reading from Q 4 2012. "The Credit Risk Index mea- sures changes in consumer credit score distributions relative to the national distribution and delin- quency rates as a whole at the end of 1998," the release noted. This year was chosen as "a rep- resentative year of credit perfor- mance within the usual dynamic of the historical credit cycle," according to the report. A value of more than 100 rep- resents a higher level of risk, and TransUnion remarked the CRI has generally ranged between 110 and 120 between 2001 and 2007 before climbing to elevated ranges from 120 and 130 during the most recent recession. The CRI peaked at the end of 2009 at 129.67, 15 percent higher than the current level. "With auto loan and credit card delinquency levels hovering near all-time lows for the last two years, and with mortgage delin- quencies seeing their biggest drop in 2013 since the housing bubble, a decline in go-forward consumer credit risk would be expected. However, it was a pleasant surprise to see the Credit Risk Index drop to levels not seen in nearly 10 years," said Ezra Becker, VP of research and consulting for TransUnion's financial services business unit. "This improvement is driven by a myriad of factors, includ- ing consumers better maintain- ing their credit relationships and fewer subprime and near-prime consumers opening new credit accounts. With credit risk at such low levels, there is a possibility that consumers in higher risk seg- ments may see more credit offers, as some lenders decide they have the room in their profit models to take on greater risk," Becker said. States experiencing the greatest CRI improvements in the last year include: California (down 12.97 percent to 100.74); Nevada (down 12.94 percent to 130.85); Florida (down 12.17 percent to 123.27); and Hawaii (down 11.62 percent to 81.99). The highest risk states include Mississippi (152.67), South Carolina (139.27), and Louisiana (139.07). The lowest risk states were North Dakota (74.57), Minnesota (78.47), and Hawaii (81.99). purchasing—as opposed to senior generations, who relocated due to retirement or to be closer to friends and family. Still, despite their evident interest, "the challenges of tight credit, limited inventory, eroding affordability and high debt loads have limited the capacity of young people to own," Yun said. Out of recent Millennial home- buyers, 20 percent said they had to delay their purchase because of difficulties saving for a down payment, with 56 percent of that group pointing to student loan debt as the greatest hurdle. In purchasing characteris- tics: The median age of recent Millennial buyers was 29, accord- ing to NAR, while their median income was $73,600. The typical choice of homes among the group was a 1,800-square foot house costing $180,000. Eighty-seven percent purchased an existing home, and they plan to stay in their homes for a me- dian 10 years. When it comes to shopping, all age groups typically began by looking online for for-sale proper- ties and then contacting a real estate agent, though NAR found Millennials are more likely to also use the Internet to find informa- tion about the buying process. When it comes time to actually buy, though, it seems there's no replacement for a human—accord- ing to the study, younger buyers relied more heavily than older groups on real estate agents to help them navigate the process. "Given that Millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand." continued froM Page 46

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