Southern States Cutting Most Mortgage Debt

NEW YORK (MainStreet) -- A survey of U.S. homeowners reveals a new twist: Southern states like Alabama and Louisiana are doing the best job of paying down mortgage debt. What's behind the numbers, and even more importantly, the timing of those numbers?

That timing is ironic.

Last week, BankingMyWay.com reported on a new trend in U.S. real estate -- the fact that home foreclosures were falling in California, but creeping upward in states east of the Mississippi River.

Maybe some savvy homeowners, especially in the South, saw that trend coming, as new research out this week shows that more of them are doing a better job of paying down their mortgage debt, thus decreasing the odds of having their homes fall into foreclosure.

The numbers come from San Francisco-based CreditKarma.com, which bills itself as the “consumer’s credit advocate.”

The company’s monthly U.S. Credit Score Climate Report for April shows the average U.S. mortgage debt falling 3%, to $166,631 on a year-to-year basis. In addition, credit card balances fell as well, by 13% to $5,650 per consumer.

But the real “inside the numbers” story is a regional one, as homeowners in eight states reduced their mortgage debt by 5% or more in the past year. Here’s the list:

--------------------------------------------------------------------------------------------------------

State                                                                            % of Mortgage Decline

Mississippi and Tennessee                                       Down 7%

South Carolina, West Virginia and Wisconsin           Down 6%

Alabama, Louisiana and Wyoming                            Down 5%

--------------------------------------------------------------------------------------------------------

Of those eight states, only Wisconsin and Wyoming are outside the American South.

So what are homeowners in Dixie doing to pay down their mortgage debts that residents in other states aren’t doing –- or at least aren’t doing as well?

It isn't any income advantage versus other U.S. regions. 

Credit Karma doesn’t say for sure, but one clue comes in home values. By and large, home values in states like Mississippi and Alabama are worth significantly less than homes in big Northern urban states like New York, or Western states like California.

So any added effort to pay down a home mortgage in Jackson, Mississippi, compared to, say, Westchester, New York, could explain why the rate of mortgage balances is falling faster in Mississippi than in New York.

Credit Karma does note that Southern consumers have the lowest credit card debt in the nation, and that consumers in Northern states (especially Massachusetts and Wisconsin) have more auto loan debt than other U.S. states. Those trends could also shed some light on Southern states and lower mortgage balances.

Whatever the reason, any trend toward lower mortgage balances is a net positive for consumers, and for the U.S. economy.

But one thing is fore sure: as other states play catch up, homeowners in the South are proving to be a good role model for the rest of the country.