Household Debt Summary
- Household debt for the first quarter of 2016 is up $136 billion.
- Mortgage debt, up $120 billion, accounts for most of the gain.
- Student loan debt, up $29 billion, accounts for most the rest.
- Total household debt still below 2008 peak
The Federal Reserve of New York reports Household Debt Steps Up, Delinquencies Drop.
Household indebtedness continued to advance during the first three months of 2016 according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, which was released today. Repayment trends also generally improved across the board, driven primarily by continuing improvements in mortgage delinquency rates. The report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.
“Delinquency rates and the overall quality of outstanding debt continue to improve,” said Wilbert van der Klaauw, senior vice president at the New York Fed. “The proportion of overall debt that becomes newly delinquent has been on a steady downward trend and is at its lowest level since our series began in 1999. This improvement is in large part driven by mortgages.”
Household Debt and Credit
90-Day Delinquencies
Note 1: Delinquency rates are computed as the proportion of the total outstanding debt balance that is at least 90 days past due.
Note 2: As explained in a previous report, delinquency rates for student loans are likely to understate effective delinquency rates because about half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle. This implies that among loans in the repayment cycle delinquency rates are roughly twice as high.
Total Debt Balance
As of March 31, 2016, total household indebtedness was $12.25 trillion, a $136 billion (1.1%) increase from the fourth quarter of 2015. Overall household debt remains 3.3% below its 2008 Q3 peak of $12.68 trillion.
It’s getting harder and harder for households to ramp up debt, despite the lowest rates in history.
Check out the trend in mortgage debt vs. the trend in student loan debt. The two items are not unrelated.
Household formation is low because of student debt, boomer demographics, and changing attitudes of millennials.
Mike “Mish” Shedlock
Why do you say it’s harder for households to ramp up debt, rather than they are choosing not to?
If your credit is already maxed, it is hard to borrow more.
If they have a 90%+ mortgage, most of their student loans, 2 car loans, and maxed credit cards, who is going to loan them more other than the payday sharks? Or their credit was destroyed in 2008-2010 so no one will lend to them other than the sharks.
So the question is, are most Americans maxed/unqualified – or do they just have a modest mortgage, pay their credit cards off every month, and drive 5+ year old paid off cars and just choose not to incur more debt.
I personally think that it is a mix of both. The former cannot get more credit (hence the harder to ramp up statement) and the latter is not interested in (or too smart to for) more debt.
Because they can’t. It’s not a choice. I have a FICO well north of 800 and CC Companies are still reluctant to give much credit line. My house is paid for, but that is not the norm. My neighbors and friends aren’t there. The areas one can ramp is a car loan and student debt. You can only afford so many cars.
Its getting harder for the Fed to encourage households to tramp up debt
That makes more sense.
Debt free except for normal monthly utilities and annual taxes and will remain that way. Life is a lot easier once you get out of debt and then learn to stay out of debt. The main problem is people want to keep up with the Jones! You will never get me nor my wife to finance a vehicle that 3 to 4 years past their warranty date.
Now I do have to maintain my home and its ancillary items.
Conveniently just below ’08 totals but it’s just the first quarter and the trend is unmistakably up! Onward and upwards, oh dear!
“Total household debt still below 2008 peak”
Technically, yes ….
BUT
Leasing doesn’t count toward household debt. And with leasing now 1/3 of new vehicle sales (17+ million/year) … AND the increasing phenomena of leasing used vehicles?
If you add vehicle leasing … several hundreds of $billions per year.
I wonder if figures are available for leasing and for such things as rental. Rather than pay day loans people hire what they need, like TVs and furniture… and shelter – even services. When they fall short the pay day ‘sharks’ come to the rescue. If we had these figures it might be become clearer to what extent the rentier class is taking over all assets and the economy. These people, aiming to own everything of value, might be worse than sharks as the public will be forever in debt and back to peasant status, but the ‘economy’ might look good.
“Overall household debt remains 3.3% below its 2008 Q3 peak of $12.68 trillion.
It’s getting harder and harder for households to ramp up debt, despite the lowest rates in history.”
In 2014, real median household
income was 6.5 percent lower
than in 2007, the year before the
most recent recession
http://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf
It makes sense. Millennials with heavy student debt cannot afford to purchase a home or are averse to taking on another large debt burden. This will also result in lower marriage rates and lower birth rates among college educated Millennials.
If delinquencies are 3.6%, and fed inflation target 2%, then short term interest rates should average 6.6%.
You also have to start factoring in the exploding Federal deficit. That money is owed in “real time” (meaning in the open market) and if the Affordable Care Act can no longer act as even the Unaffordable Care Act then you might have to order the entire health insurance industry to be nationalized. Drug costs are soaring, yields are plunging and still nothing but the Zero Bound too.
So stick it to Uncle Sam for another ten TRILLION give or take?
Works for me…
With those numbers how the F#ck do our central bankers ( and citizens) think we will see economic growth anytime soon?
Rates downwards slide, debt up, expansion flat.
What central bankers (and government officials) get to call “growth”, is a set of very narrow and technical measurements. By monkeying around with the levers they do have, they may still have some room to make those indicators indicate “growth.”
Their “growth” no longer has any meaningful correlation with what most people experience as growth, though. So it’s largely an exercise in “lies, damned lies and statistics.” Which has, honestly, been the story of “econometrics” and empirical economics since it’s inception. Perhaps why it was never included amongst government’s enumerated powers by the founders.
The bankers can go suck my….. I have no mortgage and no debt whatsoever. Along with the Fed they can all go to hell.
11% delinquency on student debt means there is tremendous room for improvement in approving college loans.
Way back when I rode my bicycle to high school and ate peanut butter sandwiches, we learned all about compound interest. Today’s college students are getting a remedial course in compound interest. They live in deluxe apartments with swimming pools, free yoga classes, air conditioning, and exercise rooms. They put rent on their student loan tab at the rate of $7K/year.
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The system is designed to keep the average person in debt up to their eyeballs. It is considered a victory for ‘the economy’ if everyone sends all their earned income to the banks.
Think about that for a minute. The media, corporations, and .gov whores would rather everybody be flat broke so they (the whores) can claim ‘economic growth.’
Everything is so backwards. People should be encouraged to save money, not spend it. How about novel concepts such as ‘living beneath your means.’ To the political hacks,’living beneath your means’ will not be tolerated.
Average people are nothing more than a giant ATM machine that the system uses to extract money from.
Economic growth and personal balance sheets seem to have an inverse correlation. I for one, have lost all respect for the GDP growth model.
Debt peonage, with variations thereon, has been a fact for millions of people over the past few millenia. That didn’t end well for them, and it won’t end well for the current practitioners either, absent some debt jubilee. That is seeming to be more and more likely given the enormity of the debts and the declining ability of incomes to pay those off. That is compounded by the instability and systemic risk in the derivatives market. At some point, the underlying assets become worthless, or in come cases, may have negative value. That latter case has been seen in intergenerational debt obligations. As others have stated, being debt-free is desirable.
Saw a statistic that about 40% of student loans are not being repaid. If true the effects of deferral and forbearance are quite significant.