Household Debt Climbs to Record High, Delinquencies Rise

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The quarterly report on household debt shows another record high. Delinquencies are up strongly as well.

Let's dive into some stats and charts from the New York Fed Third-Quarter Report on Household Debt and Credit.

Key Points

  • Aggregate household debt balances increased by $92 billion in the third quarter of 2019, a 0.7% increase, and now stand at 13.95 trillion.
  • Balances have been steadily rising for five years and in aggregate are now $1.3 trillion higher, in nominal terms, than the previous peak (2008Q3) peak of $12.68 trillion. Overall household debt is now 25.1% above the 2013Q2 trough.
  • Mortgage balances shown on consumer credit reports on September 30 stood at $9.44 trillion, a $31 billion increase from 2019Q2. Balances on home equity lines of credit (HELOC) have been declining since 2009, and this quarter’s decline of $3 billion brings the outstanding balance to $396 billion. Non-housing balances increased by 64 billion in the third quarter, with increases across the board, including $18 billion in auto loans, $13 billion in credit card balances, and $20 billion in student loans.
  • New extensions of credit were strong for the third quarter. Auto loan originations, which include both newly opened loans and leases, remained high in the third quarter, at $159 billion, a small increase from the last quarter’s volume but the second highest ever observed. Mortgage originations, which we measure as appearances of new mortgage balances on consumer credit reports and which include refinances, were at $528 billion, a notable jump from the $445 billion seen in the same quarter last year. Aggregate credit limits on credit cards also increased, by $27 billion, continuing a 10-year upward trend.
  • Credit standards tightened slightly in the third quarter. The median credit score of newly originating borrowers increased in the third quarter for mortgages, to 765, a 6 point increase from the first half of the year. Auto loans also saw tightening in underwriting standards, with an 8 point increase in the median originating credit score. The origination volume remained high, with $30 billion in subprime originations, a level on par with the last several years.
  • Aggregate delinquency rates worsened in the third quarter of 2019. As of September 30, 4.8% of outstanding debt was in some stage of delinquency, a 0.4 percentage point increase from the second quarter due primarily to increases in early delinquency buckets. Of the $667 billion of debt that is delinquent, $424 billion is seriously delinquent (at least 90 days late or “severely derogatory”, which includes some debts that have previously been charged off that the lenders continue to attempt collection).
  • About 186,000 consumers had a bankruptcy notation added to their credit reports in 2019Q3, an improvement from the 215,000 in 2018Q3.

Auto Loan Originations

Credit Score at Auto Loan Origination

Percent of Balance 90+ Day Delinquent

Transition into Serious Auto Delinquency

Transition into Serious Credit Card Delinquency

Five Comments

  1. Delinquencies have been rising for 6-7 years in this allegedly booming economy where the unemployment rate is near record lows.
  2. Subprime auto loans account for well over 25% of auto loans.
  3. Subprime auto loan serious delinquencies are at or above where they were before the start of the Great Recession in all age groups.
  4. Credit card delinquencies for the 60-69, 50-59, and 40-49 age groups are at the level reached prior to the great recession.
  5. Writeoffs rate to be immense in any sort of sustained jobs downturn.

Mike "Mish" Shedlock

Comments (35)
No. 1-12
Greggg
Greggg

I don't have a password to your photography web site, so I will drop this here. This researcher created an algorithm that removes the water from underwater images https://www.youtube.com/watch?v=ExOOElyZ2Hk

davebarnes
davebarnes

Debt is only important when measured against GDP. Student debt is the only rapidly increasing sector. Not good.

TimeToTest
TimeToTest

There really is one way out of this. Inflation

There is no other solution. It will finally come in the form of helicopter money.

Seriously Mish what stops the Fed from buying up bad debt and sending people the title to their property. Not exactly saying the Fed would ever actually free the plebes but at this point I don’t see any other way. Deflation can never be allowed the happen under any circumstance.

thimk
thimk

interesting charts, looks like we were post recession deleveraging until about 2013.

FromBrussels
FromBrussels

GREAT ! The Dow and other Ponzi schemes will SOAR !

Six000mileyear
Six000mileyear

With these levels of debt being near those of the last recession, it's no wonder the repo market froze up 6-8 weeks ago. The Fed truly is fighting the last battle.

numike
numike

"

"Some observations as a European (Dutch) visiting the US: poverty in the US seems to me, striking. I feel like, for large parts, the US is essentially a third-world country. And visiting a wealthy city – such as New York – , there is this feel of relentlessness and of desperation. I’ve also never in my interactions with people been so reduced to my income bracket or (perceived) wealth.

I also have a friend who visits the US multiple times every month (he’s an airline pilot). He’s not left at all, and not that concerned with inequality, He actively dislikes the US experience because the experience of inequality is so visceral, and seems so ingrained in American culture as normal, or as a matter of fact of the world.

When we were talking about this some time ago, we agreed that US culture felt “hollow” .. important values seem to be supplanted and replaced by money and profit. People seem to have forgotten what constitutes a good life, even if they can afford it. Of course this take is reductive, but this weird feeling I’ve felt in the US I’ve never felt anywhere else. Sadly, I also feel like the Netherlands is moving more and more in this direction."

numike
numike

The Future of Banking Is … You're Broke

Our present financial ruin is being turned into a business model. https://www.wired.com/story/the-future-of-banking-is-youre-broke/

numike
numike

The unprecedented debt load of major economies, like the United States, China and the EU is fraught with a disastrous threat for the entire world. This could lead to a disaster that will by far exceed the Great Depression if deleverage starts, Valdai Club expert Alexander Losev warns. http://valdaiclub.com/a/highlights/is-there-a-threat-of-a-new-global-economic-crisis/

Carl_R
Carl_R

Besides the fact that debt is growing much more slowly that the economy, and much more slowly than the underlying asset values, the chart that really stands out to me is the credit card delinquencies. For all age groups, delinquencies dropped precipitously after the great recession, and they have stayed low for all groups other than 18-29. It would seem that the great recession was harsh enough to teach lasting lessons about managing credit card debt to people that went through it, and that those lessons will be with them for the remainder of their lives. As for those too young to have had credit cards in the great recession, no lesson was taught, and millennials have learned nothing from their parents, and must learn for themselves the importance on managing credit card debt.

This also is reflected in the higher student loan defaults. The young could avoid much pain if they learned that the one problem with debt is that sooner or later you have to pay it back, and that if you have too much, you become a debt slave.

shamrock
shamrock

Nominal household debt is at a record high. Nominal debt/nominal GDP ratio is way, way, down.

Casual_Observer
Casual_Observer

Debt monetization is coming.