There has been a lot of good economic news lately, but debit is growing.
Mortgage rates are basically stable right now; real estate appreciation has slowed down, supported by a stronger economy. In addition, consumer confidence is stronger with wages going higher and unemployment going lower. The optimism is the primary force causing people to take on additional debt; primarily mortgage debt.
But it’s not just one kind of debt. In addition to mortgage debt there, are auto loans, credit cards, and even student loans.
The Federal Reserve Bank of New York issued its latest quarterly report on Household Debt and Credit in which it indicates in the second quarter of 2018, total household debt in the United States increased by $82 billion. This translates into a collective total of $13.29 trillion in overall debt.
It’s a little disconcerting that this number has increased now for the 16th consecutive quarter.
How does this look in the light of historic numbers? According to the Fed report, the overall debt now is $618 billion higher than the previous peak or high, which was $12.68 trillion in the third quarter of 2008.
There’s both good news and bad news in this: it appears that $82 billion of this debt came from mortgages. Mortgages represented a $60 billion bump from the first quarter, to the second quarter and right now the total debt attributed to mortgages stands at $9 trillion. To some this can be concerning, but back in 2008 and 2009, the credit criteria for getting a loan was much more flexible and generous. Today, the criteria for getting a loan on a home are much stricter. Also it appears that the economy, the true economy, is growing at a strong 3% annual rate.
Even the Fed states that the small increase in mortgage originations represents a relatively stable movement which has taken place over the last six quarters.
Other statistics
■ The median credit score for new originating borrowers was 760.
■ Mortgage delinquencies have been falling with approximately 1% of current balance moving into delinquency status.
■ Only 76,000 individuals had a foreclosure notation added to a credit report between April 1st and June 30th.
■ HELOC balances saw a drop of $4 billion for the second quarter and now are at $432, a $20 billion reduction from where we were in 2017.
■ Student loans increased year-over-year by $61 billion to $1.41 trillion.
■ Auto debt rose by $9 billion to $1.24 trillion.
■ Credit card debt increased $14 billion in the second quarter and now is $829 billion.