US Household Debt Rose To $12.6 Trillion In 2016: Biggest Jump In A Decade

Tyler Durden's picture

While it does not contain any new information to those who track the monthly, G.19, consumer credit releases by the Fed, the quarterly NY Fed report on Household Debt and Credit Developments provides a convenient one-stop summary of quarterly changes in household finances. What the latest report issued this morning revealed, is that total US household debt jumped in Q4 driven by increases in credit card debt, auto and student loans, and a Q4 surge in mortgage originations, and as of December 31, 2016, stood at $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016. For the full year 2016, total household debt rose by $460 billion, the biggest annual increase in a decade.

Total household debt has risen by 12.8% from its Q2 2013 trough, and is just $99 billion, or 0.8%, shy of its all-time peak of $12.7 trillion set in Q3 2008 just as the financial crisis was starting. At this rate household debt will set a new all time high some time in the first quarter.  When measured as a percentage of GDP, total household borrowing today is 67% of nominal gross domestic product, compared with about 85% in 2008.

Mortgage balances, the largest component of household debt, increased during the fourth quarter by $130 billion, and stood at $8.48 trillion at December 31. Additionally, all types of non-housing debt balances grew in the fourth quarter, with a $22 billion increase in auto loan balances, $32 billion increase in credit card balances, and $31 billion increase in student loan balances.

According to Wilbert van der Klaauw, an economist at the New York Fed, “debt held by Americans is approaching its previous peak, yet its composition today is vastly different as the growth in balances has been driven by non-housing debt."

The average household debt composition in a select group of states and the US in general, is shown in the chart below. As usual, California leads the pack.

Debt balances increased across all debt products, with a 1.6% increase in mortgage balances, a 1.9% increase in auto loan balances, a 4.3% increase in credit card balances, and a 2.4% increase in student loan balances this quarter.

While households shed nearly $1.5 trillion in housing-related debt between 2008 and 2013 through a combination of foreclosure and slow debt repayment, in recent years the trend has changed, and according to the report, in 2016 mortgage originations - measured as appearances of new mortgage balances on consumer credit reports and which include refinanced mortgages -  were at $617 billion, the
highest level of originations seen since the beginning of the Great Recession. This trend, however, may be derailed by the recent jump in mortgage rates.

Yet despite the seeming bank generosity, it is worth noting that credit standards have continued to tighten in 2016:  the distribution of the credit scores of newly originating mortgage loan borrowers tightened a bit, with the median score
for originating borrowers for mortgages increasing to 763; about 58% of new mortgages went to borrowers with the top credit scores, or over 760 during 2016, compared with an average of 54% in 2015, as banks seemed to focus on the most credit-worthy borrowers.

Additionally, in a troubling trend we point out every month, the biggest driver of household debt growth over the past decade has been the rise of student loans and auto loans. Where a decade ago there was less than $500 billion in student loans, as college tuition soared, the sum surpassed $1 trillion for the first time in 2013 and stood at $1.3 trillion in the fourth quarter. It is currently over $1.4 trillion according to more recent reports.

Then there are car loans: there were $142 billion in auto loan originations in the fourth quarter, making 2016 the highest auto loan origination year in the 18-year history of the data. Here too lending standards tightened, as 32% of dollars originated to borrowers with credit scores over 760 in the fourth quarter, compared to only 29% for the first 3 quarters of 2016.

Elsewhere, the aggregate credit card limit increased for the 16th consecutive quarter, with a 2.3% increase. Aggregate HELOC limits were roughly flat.

Finally, delinquency rates were roughly stable in the last quarter of 2016, with a small uptick in severely derogatory balances offset by a modest improvement in 30 days delinquent balances. As of December 31st, 4.8% of outstanding debt was in some stage of delinquency. Of the $607 billion of debt that is delinquent, $412 billion is seriously delinquent (at least 90 days late or “severely derogatory”).

There was one major red flag: auto loans delinquent by 30 days or more grew to $23.27 billion, the most since $23.46 billion in the third quarter of 2008. They were up from $22.98 billion in the prior quarter. Seriously delinquent auto loans whose payments were 90 days or more past due jumped to $8.24 billion in the fourth quarter, the highest since the third quarter of 2016, according to the survey. As Reuters adds, the increase in late loan payments coincided with drivers loading up on debt to buy the latest car, trunk and SUV models, fueling expectations for record auto sales in 2017.

That said, all eyes remain on delinquent student loans, where the trend continues to deteriorate with every passing quarter. Furthermore, we would take the chart below of seriously delinquent balances with a grain of salt: recall that one month ago, the US government admitted to fabricating student loan default data.

To summarize the key points:

Housing Debt

  • There were $617 billion in newly originated mortgages this quarter, the highest level seen since 2007Q3.
  • Mortgage delinquencies were mostly unchanged, with 1.6% of mortgage balances 90 or more days delinquent at the end of 2016Q4.
  • Delinquency transition rates for current mortgage accounts improved slightly, with 1.0% of current balances transitioning to delinquency, from 1.2% in 2016Q3. Of mortgages in early delinquency, 18%  transitioned to 90+ days delinquent, while 37% became current.
  • About 79,000 individuals had a new foreclosure notation added to their credit reports between October 1 and December 31st.

Student Loans, Credit Cards, and Auto Loans

  • Outstanding student loan balances increased by $31 billion, and stood at $1.31 trillion as of December 31, 2016.
  • 11.2% of aggregate student loan debt was 90+ days delinquent or in default in 2016Q42.
  • Auto loan balances increased by $22 billion, continuing their steady rise. Auto loan delinquency rates deteriorated again, with 3.8% of auto loan balances 90 or more days delinquent on December 31, 0.2% above last quarter.
  • Credit card balances increased by $32 billion, to $779 billion, while 90+ credit card delinquency rates were unchanged at 7.1%.
  • Credit Inquiries
  • The number of credit inquiries within six months – an indicator of consumer credit demand – declined from the previous quarter, to 171 million.

The full report can be found here.

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Chupacabra-322's picture

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turnball the banker's picture
turnball the banker (not verified) Feb 16, 2017 5:01 PM

Gurgle that debt down cumsucking goy

Kaiser Sousa's picture

meanwhile, outside of Ameridumb...

"A landlocked nation perched between China and Kazakhstan is embarking on an experiment with little parallel worldwide: shifting savings from cattle to gold. One of the first post-Soviet republics to adopt a new currency and let it trade freely, Kyrgyzstan's central bank wants every citizen to diversify into gold. Governor Tolkunbek Abdygulov says his "dream" is for every one of the 6 million citizens to own at least 100 grams (3.5 ounces) of the precious metal, the Central Asian country's biggest export.

"Gold can be stored for a long time and, despite the price fluctuations on international markets, it doesn't lose its value for the population as a means of savings," he said in an interview. "I'll try to turn the dream into reality faster." In the two years that the central bank has offered bars directly to the population, about 140 kilograms of bullion have been sold, Abdygulov, 40, said by phone from the capital, Bishkek..."

https://www.bloomberg.com/politics/articles/2017-02-15/currency-pioneers...

 

cowdiddly's picture

Did the math a few days ago. Russia already has .36 Troy OZ for EVERY Russian citizen. About 6 years ago they had hardly any. We just practically give it to them to this day. Gee I wonder what they plan on doing with that?

The Russians and Chinese learned a very valuable lesson watching the Iranians workaround under those dumbass Obama sanctions against them.

They devised a workaround without petrodollars where India bought the oil from Iran by buying gold from Turkish banks then paying to Iran who then sold the gold back.

Beautifully Simple little 3 way that the Obama administration made possible that has huge ramifications. Someone actually figured out how to sell and buy oil without a petrodollar or a sanction mattering in the least.

First the oil market is at least 10x as large as the gold mkt...................for now.

Now fast forward to  now.

 Part 1 of the three way in place. the phisical gold contract in Shanghi doing a tremendous amount of business and growing.

Part 2 in place: The Russians anounce that they will now sell oil in RMB.

all thats missing is part three a RMB contract selling in China or Russia for the final piece and you have just made the petrodallar USELESS.

And those trillions of Treasuries that used to be exchanged for oil are suddenly IRRELEVANT to the oil trading nations.

Good luck guys. Hope you enjoyed that mental mindfuck because i think its almost here,

 

 

LawsofPhysics's picture

I agree.  Consumable calories are paramount to keep the real economy going.  precisely why 'merica has become a significant exporter.  Will 'merican producers accept FRNs, RMBs or gold...

so many questions, but it will get interesting either way.

clsoed's picture

Well Governor Tolkunbek Abdygulov is about to be accused of human rights violations.

buzzsaw99's picture

i never would have guessed that credit quality for morts and auto loans was actually on the rise. i have to believe credit quality for student loans would be absolute shit without the fed gub backing them. fascist jpm wouldn't have it any other way.

rejected's picture

They're probably manipulating the credit scores... like they manipulate everything else...

Know shit's picture

You have to be kidding me?

Perhaps this is what is in the first chapter of the big debt book, but definitly not the end of it.
Probably all these funny digital numbers in a computer representing some value expressed in fiat are allready taken into account as a positive number te reduce the debt?

All value only in the books available because they are only fiction made possible by derivitives and other black magic is counted as well?
Etc etc.

If we would take all into account we would not talk about a number expressed in funny money, but about a number representing the generations that will have to work as slaves to pay everything back.

Take care

WTFUD's picture

Happily Dazed, baaaaah!

Hohum's picture

"Surprise, surprise."  G. Pyle.

radio man's picture

Its Bush's fault! Wait, what? Its Trump's fault! Obama was on vacation, so back off! Whats wrong with you "normalists"?

Post Script. It was just this morning I overheard a phone conversation between a beloved coworker and Sun Trust Bank. Lenny paid off his mortgage and two cars late last year. Sun Trust has a burning desire to reintroduce their institution to a client suddenly foremost on their mind. I feel the warmth.

jamesmmu's picture
Gold Continues Its March Higher. Can The Precious Metal Keep The Momentum Going

http://investmentwatchblog.com/gold-continues-its-march-higher-can-the-p...

Know shit's picture

March higher....?

You are talking about these hardly to detect rmovements we currently see?

I will turn in my sleep when gold goes through 1900 and silver through 50.
I doubt if I will get up if it doubles those numbers...
:0)

Take care

LawsofPhysics's picture

But I thought "debt was money"...

..aren't we all richer now?

/s

 

Vinividivinci's picture

That's what happens when the lower middle class tries to live large.
No pity for the sheeple.

Blankenstein's picture

Not just the lower middle class, a good portion of the middle and upper middle class are living large also.  Lots of big houses with big mortgages in the suburbs.  And don't forget the new cars and the vacations, so you can take pictures and try and impress all of your 'friends' on facehole. 

Let it Go's picture

It is clear debt has become the main driver of both the American and global economy. This is not just about the auto loans we are seeing here in America, a giant debt bubble is forming that extends into many sectors of our economy. This is also happening in many places across the world.

The Federal Reserve has been pumping in trillions of dollars of liquidity into the economy and much of it has resulted in pulling future consumption forward. These policies will soon become a headwind to both future sales and growth. More on the ramifications of this policy in the article below. 

 http://brucewilds.blogspot.com/2016/12/debt-main-driver-of-both-american-and.html

JailBanksters's picture

Debt = Wealth

As long as you can create money out of thin air so you loan it out.

 

dojufitz's picture

I have said it before.... come to Melbourne Australia & stare at the home prices......people will think you have Parkinson's because your head will never stop shaking....

Muppet's picture

Ten trillion was me.  Sorry.  I had to pay my property taxes.  Again, sorry.