Household Debt Rises By $572 Billion, Ends 2017 At All Time High

After we first reported last week  that US credit card, student and auto debt all hit record highs in December of 2017...

... it should not come as a surprise that according to the just released latest quarterly household debt and credit report  by the NY Fed, Americans' debt rose to a new record high in the fourth quarter on the back of an increase in virtually every form of debt: from mortgage, to auto, student and credit card debt (although HELOCs posted a tiny decline).

Aggregate household debt increased for the 14th straight quarter, rising by $193 billion (1.5%) to a new all time high, and as of December 31, 2017, total household indebtedness was $13.15 trillion, an increase of $572 billion from a year ago - the fifth consecutive year of increases - equivalent to 67% of US GDP, versus a high of around 87% in early 2009. After years of deleveraging in the wake of the 2007-09 recession, household debt has risen more than 18% since the trough hit in the spring of 2013.

Some more big picture trends:

  • Mortgage balances, the largest component of household debt, increased by $139 billion during the quarter to $8.88 trillion from Q3 2017.
  • Balances on home equity lines of credit (HELOC) have been slowly declining; they dropped by another $4 billion and now stand at $444 billion.
  • Non-housing balances, which have been increasing steadily for nearly 6 years overall, saw a $58 billion increase in the fourth quarter.
  • Auto loans grew by $8 billion to $1.22 trillion
  • Credit card balances increased by $26 billion to $834 billion
  • Student loans saw a $21 billion increase to $1.38 trillion

There were some red flags of caution: confirming recent negative data from Wells Fargo, and suggesting that the housing recovery is stalling, mortgage originations were at $452 billion, down from $479 billion in the third quarter.

Also troubling: There were $137 billion in auto loan originations in the fourth quarter of 2017, a small decline from 2017Q3 but making 2017 auto loan origination volume the highest year observed in our data.

Meanwhile, credit card balances increased by $26 billion. Aggregate credit card limits rose for the 20th consecutive quarter, with a 1.0% increase.

The table below summarizes the key changes in household debt and credit developments as of Q4 2017

On the qualitative front, Aggregate delinquency rates improved in the fourth quarter of 2017. As of December 31, 4.7% of outstanding debt was in some stage of delinquency. Of the $619 billion of debt that is delinquent, $406 billion is seriously delinquent (at least 90 days late or “severely derogatory”). The flow into 90+ days delinquency for credit card balances has been increasing notably from the last year and the flow into 90+ days delinquency for auto loan balances has been slowly increasing since 2012.

Unlike last quarter, when the New Your Fed explicitly warned that credit card and auto loan "flows into delinquency" increased, this time sequential flows showed improvement across all debt categories.

As discussed previously previously, Americans are increasingly layering all forms of household debt, with credit card, student and auto loan balances all at record highs. Perhaps this is driven by consumer confidence, which has been tracking at near a two-decade high as well as the all time high in the stock market. The flip side, of course, is the collapse in the savings rate, which in January plunged to a near all time low.

In a testament to the recent Trumphoria, most American workers are expected - and expecting - to see larger paychecks early this year due to lower taxes. It remains to be seen if Americans will use that windfall to boost spending further, pay down debt or add to savings.

With interest rates on household credit rapidly rising, and with no savings to fall back on, this is a recipe for disaster once the economic environment turns, and consumers retrench, only to find that their monthly interest payments are the highest in a decade.

As confirmation, expect delinquency trends to turn sharply higher over the coming months as higher interest rates come home to roost.

Source: NY Fed

Comments

ParkAveFlasher Seasmoke Tue, 02/13/2018 - 14:10 Permalink

I hit LL Bean clearance for shirts to wear to work, never pay over $25 for all-cotton button down that fits and lasts.  Made in Bangladesh.

I still have tshirts from 1995, that were sized "large", that fit just right.  Tshirts sized "large" today tend to hug up into my armpits and love chunkas in a creepy way, which is how I generally feel about millenials too, with the facial hair and all. 

So even with $30 tshirts that are more like torso pantyhose, there is somehow less inflation, thus household debt rising is a total surprise.  here I was thinking all the spreadsheets I pimp for a living had a real and concrete value to the world marketplace and payrolls in America would go up forever.

In reply to by Seasmoke

Endgame Napoleon ParkAveFlasher Tue, 02/13/2018 - 15:10 Permalink

But since so many people, including wealthier people, buy Made-in-Asia goods from the big luxury and / or discount retailers on the clearance rack, it still reduces the profit for independent retailers, making that a losing battle for most, even for people in business in affluent areas for so many years that, upon closing, the newspaper has a large feature on their stores. 

All things considered, clothing and other less essential things, like toys and plastic containers, have deflated, but it does not matter for most who live on earned-only income, with wages stagnating or decreasing for 40 years and rent absorbing more than half of monthly pay. In past eras, when peripheral items, like clothing, cost a little more, things lasted longer, and people could sew on a button. Most women, in fact, could sew whole outfits.  

In reply to by ParkAveFlasher

D.T.Barnum Tue, 02/13/2018 - 13:52 Permalink

It might be 5 weeks, it might be 5 years, but eventually Americans are going to learn the hard way that living past your means and debt (actions) have consequences.  Causes do indeed have effects,  it's a universal law.

The bubble Greenspan started is a Frankenstein.  God Help Us All.

These consistently low interest rates and buying of bonds by the FED causes materialism, laziness, and subsidizes the failed imperialist and social policies of both red and blue teams.  It has ruined our society.

Bill of Rights D.T.Barnum Tue, 02/13/2018 - 14:18 Permalink

I will agree that we have lost our way, but Voting and elections have consequences. Now there are those who will say voting doesn't matter. With the electing of Trump that line of BS has changed. HE WON FAIR AND SQUARE!

I admit There's a lot of work to do to repair the damage that has been done by the same voting populace, we can only wait and see what happens. Many times we were warned...many times.

In reply to by D.T.Barnum

D.T.Barnum Bill of Rights Tue, 02/13/2018 - 14:08 Permalink

It's sad that the technocrat banksters have found a way to suppress the value of silver.  Regardless, I never said to buy PMs.  I don't know what to do.  Holding onto your wealth and purchasing power these days is like trying to grip sand.  The harder you squeeze the more you lose.  The technocrat banksters have godlike power; and I mean that as literally as possible.

In reply to by Bill of Rights

bitzager D.T.Barnum Tue, 02/13/2018 - 14:22 Permalink

Bro, "to learn a hard way", we should have a lawful money first, since 1933 there is no such case and we are currently at Banking holiday (1933 emergency banking act) and US.corp bankruptcy procedure. So therefore Americans cannot "PAY" for anything by definition, cause there is no Money, - all DEBT!!! and (-1) + (-1) = -2 not ZERO in other words when you are "paying" for DEBT with another DEBT instrument such as Federal Reserve Non-Negotiable Promissory NOTE you are actually multiplying DEBT. Everything just accounting tricks...

In reply to by D.T.Barnum

MusicIsYou Tue, 02/13/2018 - 13:57 Permalink

Bunch of debt addicts. My household debt is continuously decreasing. That's just yet another way I'm different from schizo fellow Americans who run up debt and then scoff at D.C for doing it. The American way is to save their own money up in accounts, and run up credit and then claim bankruptcy. I want to see the privilege of bankruptcy removed and debtors prison brought back. Then they can work for free until their debt is paid in American factories to compete with China. 

Endgame Napoleon JibjeResearch Tue, 02/13/2018 - 15:20 Permalink

The economy depends on citizens and noncitizens, working part time to stay below the income limit for various pay-per-birth welfare programs and so-called tax credits, having sex and producing more children than they can afford to feed, whereupon they are given everything from free food, to free rent, to monthly cash assistance to doubled child tax credits up to $6,444 to spend on Made-in-Asia goods. I just heard a RepubliCON explaining how [vibrant] this economic plan is and how, as with Mexico’s economy, it will grow ours.  

In reply to by JibjeResearch

Endgame Napoleon InnVestuhrr Tue, 02/13/2018 - 15:33 Permalink

Your plan might work for citizens and noncitizens whose major household bills, like housing, are covered by governent as a reward for sex and reproduction, but everyone else has to pay it to make sure they can rent and cover other unaffordable, major expenses. Rent absorbs more than half of monthly, earned-only income. When working in financial services, people who did not pay their bills told me a lot of harrowing stories, leading me to believe there are consequences for those who do not pay. Major expenses are not financed by government unless you irresponsibly have more kids than you can afford as a citizen, a legal immigrant or an illegal immigrant and then work part time, strategically staying below the income limits for monthly welfare that covers your rent and groceries and now-doubled, refundable child-tax-credit welfare up to $6,444. So, it depends on who you are. Are you sexing and birthing it up for the motherland, like a good fake womb-based feminist? Otherwise, you better be cautious with money.

In reply to by InnVestuhrr

wmbz Tue, 02/13/2018 - 14:06 Permalink

"It remains to be seen if Americans will use that windfall to boost spending further , pay down debt or add to savings"

~I'll go out on a limb here and say..."will use that windfall to boost spending further"

That's what the great American consumer is trained to do, from birth. They "want" stuff, things and a whole lot of it!

octomancer wmbz Tue, 02/13/2018 - 14:15 Permalink

"That's what the great American consumer is trained to do, from birth. They "want" stuff, things and a whole lot of it!"

Couldn't agree more. Not just the US though. It's pretty awful in the UK too. Japan seems as bad or worse.

My sister and her daughter were so addicted to shopping that they started to call it "the thing", a joke, but only half so. My niece gave all her cards to her Dad because she couldn't control her spending and it was the only way she could pay down her debt. What a horrific environment to live in.

In reply to by wmbz

Endgame Napoleon wmbz Tue, 02/13/2018 - 15:46 Permalink

Parents are the ones getting huge tax welfare as usual, ostensibly for child care. Parents are the ones in workplaces who 1) have extreme amounts of excused time off to go on frequent and lengthy vacations and 2) have the extra money to go on lots of vacations. Yet, they  cannot afford a utility, like childcare. Past history suggests that not-working-very-hard crony parents will spend their tax welfare on more babyvacations. 

Some will spend the money on things like home renovations, not that parents hoarding two good-paying jobs under one roof have to choose one. They can indulge in multi mom-pampering items, as can the “poor” mommas, getting the now-doubled, refundable child tax credits that equaled 3 months of wages in a $9-per-hour job at the $6,444 max before doubled by the Swamp.

There is a reason why many working moms brag about multiple trips to Florida with boyfriends and sport a new $900 tattoo every few months. When your main expenses — rent, groceries, etc. — are covered by taxpayers, your child-tax-credit welfare can be (and is) used on mom-pampering. These beleaguered parents have other sources of income as well, including untraceable help from boyfriends, help cubed from the kids’ grandparents and help from many family-centric charities.

Moms are used to spending money and will continue. It is their due for working part time in the many mom-dominated jobs “voted best for moms,” having sex and birthing for the motherland to grow the economy.  

Productivity in the USA is low, but spending is high.

In reply to by wmbz

MusicIsYou Tue, 02/13/2018 - 14:08 Permalink

Plain and simple way to compete with cheap Chinese labor and products, debtor's prison for Americans in U. S factories. There's no other way the U. S could possibly compete with China.