Margins and Paddings Update

Most people will tell you that they’re extremely proud when their hometown or current city accomplishes something. Hometown pride is why people are diehard fans for the local professional or college sports teams. Knowing that their city shines bright in any light, gives people a good feeling inside. With that said, people in the New York Metro area should have a strong sense of pride in how their businesses are performing. According to Experian’s Q2 Metro Business Pulse analysis, which looks at the top metropolitan areas in four key business credit categories, businesses in the New York area had the lowest average bankruptcy rates in the quarter, at just 0.28 percent. Those in the Nassau, NY; Baton Rouge, La; Honolulu; and Miami areas also have reason to be excited, as their businesses rounded out the top five with the lowest rates in this category. Another group of people who have reason to celebrate are those who live in the San Francisco area. Businesses there paid their bills an average of 3.2 days beyond contracted terms (DBT), more than 2.5 days less than the national average of 5.7 DBT. Businesses in the Omaha, Neb.; New York; Seattle; and Milwaukee metro areas also finished paying their bills faster than the national average. On the flipside, businesses in the Fort Myers, Fla. region took the longest to pay their bills, with businesses paying 18 days beyond contracted terms. The Orlando, Fla. Las Vegas; Miami; and Fort Lauderdale, Fla. metro areas rounded out the bottom five slow payers. The analysis also showed that all metro areas in the top five of business delinquency rates were well below the national average of 9.64 percent. Salt Lake City area businesses had the lowest business delinquency rates in Q2 at 0.92 percent, followed by Boise City, Idaho (1.62 percent); Houston (2.19 percent); San Diego (3.13 percent); and Tucson, Ariz. (3.17 percent). Conversely, businesses in the Miami metro area had the highest delinquency rate of 44.72 percent, followed by Fort Myers, Fla.; Orlando, Fla.; Cincinnati; and Fort Lauderdale, Fla. To view the full analysis, visit our Metro Business Pulse website. For more information on this report and other business-related insights, visit www.Experian.com/b2b.

An analysis of trends shows that mortgage originations have increased by 10 percent from a year ago. More important, a look at the most recent completed quarter shows a 29 percent increase in home purchases from the prior quarter and a decrease in the number of refinances, suggesting a sustained recovery is beginning to come from purchases. These findings and others were part of the quarterly analysis from Experian that examines real-estate trends. The key statistic in the real-estate market is the change in the ratios of refinances versus home purchases, with purchases making up a much greater proportion of the total origination volume. The data from Experian’s IntelliView product indicates that despite a 7 percent decrease from the previous quarter in refinancing activity, home purchases grew by 20 percent year over year and 29 percent quarter over quarter, and this is where we can begin to see some of the real-estate recovery taking place.” The analysis of existing and new home sales also points to the turnaround in the real-estate market. The data shows a reduction in sales of distressed homes and an increase in conventional sales. Since last year, the sales of distressed properties from short sales and foreclosures have been reduced from 25 percent to just 15 percent, while conventional existing home sales grew by 32 percent year over year, nearly double the overall growth rate of existing home sales. Combine this with strong growth year over year from new home sales at 38 percent, and it is easy to see that the recovery could be coming from purchases. Looking at the top metropolitan areas in terms of price appreciation and origination volume, Las Vegas, Nev.; Phoenix, Ariz.; and Atlanta, Ga., were three cities ranked in the top five for both categories. They were followed by Miami and Tampa, Fla., both in the top five for originations but not for prices, even though they had respectable double-digit price percentage increases. San Francisco and Los Angeles, Calif., also saw top-five price gains, but they were not in the top five for originations, despite their strong performance. This indicates that the areas showing the greatest recovery are those that were hardest hit during the downturn, such as Florida, Nevada, Arizona and California. Further evidence of the improving real-estate market is the significant jump in home-equity lines of credit (HELOC) in the second quarter of FY 2013 — the first major jump of this kind since the recession. Growing slowly but consistently since 2010, it increased about 10 percent last year but exploded this quarter with a more than 30 percent increase in the quarter and year over year. This data demonstrates an improved position for many consumers who now have equity in their homes due to market price increases. We continue to see a very conservative lending approach, with nearly 90 percent of HELOCs still coming from super-prime and prime consumers. However, there is an opportunity for more people to actually participate in getting a home-equity line because of home price improvements. This trend is likely to continue as we see more homeowners move into a better equity position. The West, Midwest, South Central, South Atlantic and Northeast regions of the United States all have shown strong year-over-year growth in HELOCs, with the West being the standout among the group. This is attributed to the price appreciation coming from cities like San Francisco, Los Angeles, Phoenix and Las Vegas. The Northeast also consistently leads in HELOCs nationwide regardless of how the real-estate market is performing in that area of the country. A look at mortgage delinquencies is the final piece of the data puzzle supporting a real-estate recovery. In this area, Experian® continues to see a downward trend across all the different time segments. The analysis showed that short-term delinquencies — 30 to 59 days past due (DPD) — dropped to 1.51 percent for the quarter and have been less than 2 percent for more than a year and a half. Midrange delinquencies — 60 to 89 DPD — saw a very slight 1 percent increase for the quarter, but they have been less than 1 percent for more than a year and a half as well. Long-term delinquencies — 90 to 180 DPD — were down 1.32 percent for the quarter. This impressive downward trend is the result of bad loans from the first real-estate bubble being removed and replaced with postrecession conservative lending. The data for this insight and analysis was provided by Experian’s IntelliViewSM product. IntelliView data is sourced from the information that supports the Experian–Oliver Wyman Market Intelligence Reports and is easily accessed through an intuitive, online graphical user interface, which enables financial professionals to extract key findings from the data and integrate them into their business strategies. This unique data asset does this by delivering market intelligence on consumer credit behavior within specific lending categories and geographic regions.

An Experian analysis of bankcard trends from Q2 2013 showed a 21 percent year-over-year increase in bankcard origination volumes, equating to $12 billion increase in new bankcard limits issued. Other insights offered by Experian, the leading global information services company, include record lows in early-stage bankcard delinquencies. Bankcard originations continue to track with the recovery in terms of steady growth. While we may never hit the volumes we saw in 2007, the consistent growth rates that we are currently seeing in bankcard originations signal that the market is coming back online. In looking at bankcard originations by VantageScore®, the year-over-year growth in originations has largely been driven by the prime and near-prime segments, comprising almost the entire $12 billion increase in new credit limit dollars originated. This trend points to the fact that prime and near-prime consumers are accepting the offers being extended to them and that lenders are continuing to lend a little deeper to drive bankcard growth. Equally important is that prime and near-prime bankcard utilization rates are not as high as they were a year ago. This is a positive trend, because it shows that despite an increase in new bankcard users, consumers are managing their credit wisely. The analysis of bankcard delinquency and overall risk exposure also continues to support the steady recovery of the bankcard market. Charge-off rates are significantly down, to an annualized rate of 3.9 percent, with early-stage delinquencies coming in at historic lows of 0.9 percent of balances for the quarter. Additionally, total risk exposure has dropped $3 billion from the previous quarter in 2013. These trends are a positive sign for overall economic recovery and evidence that the post-recession growth in the bankcard market is not coming at the expense of increased delinquencies. The data for this insight and analysis was provided by Experian's IntelliView (SM) product. IntelliView data is sourced from the information that supports the Experian-Oliver Wyman Market Intelligence Reports and is easily accessed through an intuitive, online graphical user interface, which enables financial professionals to extract key findings from the data and integrate them into their business strategies. This unique data asset does this by delivering market intelligence on consumer credit behavior within specific lending categories and geographic regions.