Deleveraging? Not Quite: Household Debt Quarterly Report

The Fed's household debt quarterly report shows no aggregate deleveraging although mortgage debt is below the 2008 peak.

The Fed's Quarterly Report on Household Debt and Credit show overall debt hit a new high in the fourth quarter of 2017.

The composition of the debt has changed. Mortgage debt is still below the 2008 peak.

Aggregate household debt balances increased in the fourth quarter of 2017, for the 14th consecutive quarter, and are now $473 billion higher than the previous (2008:Q3) peak of $12.68 trillion. As of December 31, 2017, total household indebtedness was $13.15 trillion, a $193 billion (1.5 percent) increase from the third quarter of 2017. Overall household debt is now 17.9 percent above the 2013Q2 trough.

Number of Accounts by Type

The number of auto loan accounts well exceeds the 2008 peak, while the number of mortgage loan accounts is well below the previous peak.

Mortgage Originations by Credit Score

Credit Score Percentiles

Credit scores show how the housing bubble formed. Things are comparatively benign now.

Auto Loan Scores

Auto loan scores have improved since 2008 but they represent a problem area.

Percent of Balance 90 Days or Over Delinquent

Auto loan delinquencies are on the rise. I believe those student loan numbers are massaged.

Total Balance by Delinquency Status

That chart looks as if it's in a bottoming process. Rising interest rates, rising rent, and rising medical expenses will eat up every bit of wage gains.

Mike "Mish" Shedlock

Comments (11)
No. 1-11
shamrock
shamrock

I think those are absolute rather than inflation adjusted dollars, so Debt/GDP is still much lower than the peak.

FelixMish
FelixMish

Are credit scores computed pretty much the same throughout this time period?

Grumblenose
Grumblenose

One wonders if the decline in serious mortgage/HELOC delinquency merely mirrors the rise in home prices. If you're not underwater it makes more sense to sell your home rather than face a foreclosure where you would probably lose most or all of any equity you have in the property. The true test comes if or when home prices fall again.

Rayner-Hilles
Rayner-Hilles

The Federal Reserve cannot and will not allow the property market to ever deleverage because it would cause the money supply to contract. Every last one of 'em is a soporific academic Keynesian in the spirit of St Paul Krugman. The moment they get a whiff of the money supply contracting they will be thrown into harrowing visions of the Great Depression, and they shall panic as a result. They'll nationalize the entire mortgage debt if they have to. Better hyper-inflation than deflation is their battle cry.

What is clear is that mortgage lending is approaching stagnation, just as it did from about 2006-2008, and that's a problem because if a fellow can't sell his house to another man who's willing to take out an even greater loan on it, then the world comes to an end.

Rayner-Hilles
Rayner-Hilles

Now the money supply in the investment world - on the other hand - can go straight to hell as far as the Fed is concerned, which is what we're witnessing this very month.