Chart: US consumer debt nears $16 trillion
According to the Federal Reserve (Fed), US consumer debt is nearing a record high 16 trillion dollars. Crucially, the rate of increase in consumer debt in the fourth quarter of 2021 was also the highest since 2007.
This chart provides context on consumer debt using data from late 2021.
Housing Vs. Non-Housing Debt
The table below contains the data used in the graph above. housing debt covers mortgages while Non-home debt includes car loans, student loans, and credit card balances.
| date | housing debt (trillion USD) |
Non-home debt (USD trillions) |
total consumer debt (USD trillions) |
|---|---|---|---|
| Q1 2003 | 5.18 | 2.05 | 7.23 |
| Q2 2003 | 5.34 | 2.04 | 7.38 |
| Q3 2003 | 5.45 | 2.10 | 7.55 |
| Q4 2003 | 5.96 | 2.10 | 8.06 |
| Q1 2004 | 6.17 | 2.13 | 8.30 |
| Q2 2004 | 6.34 | 2.12 | 8.46 |
| Q3 2004 | 6.64 | 2.20 | 8.84 |
| Q4 2004 | 6.83 | 2.22 | 9.05 |
| Q1 2005 | 7.01 | 2.19 | 9.20 |
| Q2 2005 | 7.23 | 2.26 | 9.49 |
| Q3 2005 | 7.45 | 2.35 | 9.80 |
| Q4 2005 | 7.67 | 2.34 | 10.01 |
| Q1 2006 | 8.02 | 2.36 | 10.38 |
| Q2 2006 | 8.35 | 2.40 | 10.75 |
| Q3 2006 | 8.65 | 2.46 | 11.11 |
| Q4 2006 | 8.83 | 2.48 | 31.11 |
| Q1 2007 | 9.03 | 2.46 | 11.49 |
| Q2 2007 | 9.33 | 2.53 | 11.86 |
| Q3 2007 | 9.56 | 2.58 | 12.14 |
| Q4 2007 | 9.75 | 2.63 | 12.38 |
| Q1 2008 | 9.89 | 2.65 | 12.54 |
| Q2 2008 | 9.95 | 2.65 | 12.60 |
| Q3 2008 | 9.98 | 2.69 | 12.67 |
| Q4 2008 | 9.97 | 2.71 | 12.68 |
| Q1 2009 | 9.85 | 2.68 | 12.53 |
| Q2 2009 | 9.77 | 2.63 | 12.40 |
| Q3 2009 | 9.65 | 2.62 | 27.12 |
| Q4 2009 | 9.55 | 2.62 | 12.17 |
| Q1 2010 | 9.53 | 2.58 | 12.11 |
| Q2 2010 | 9.38 | 2.55 | 11.93 |
| Q3 2010 | 9.28 | 2.56 | 11.84 |
| Q4 2010 | 9.12 | 2.59 | 11.71 |
| Q1 2011 | 9.18 | 2.58 | 11.76 |
| Q2 2011 | 9.14 | 2.58 | 11.72 |
| Q3 2011 | 9.04 | 2.62 | 11.66 |
| Q4 2011 | 8.90 | 2.63 | 11.53 |
| Q1 2012 | 8.80 | 2.64 | 11.44 |
| Q2 2012 | 8.74 | 2.64 | 11.38 |
| Q3 2012 | 8.60 | 2.71 | 31.11 |
| Q4 2012 | 8.59 | 2.75 | 11.34 |
| Q1 2013 | 8.48 | 2.75 | 11.23 |
| Q2 2013 | 8.38 | 2.77 | 11.15 |
| Q3 2013 | 8.44 | 2.85 | 11/29 |
| Q4 2013 | 8.58 | 2.94 | 11.52 |
| Q1 2014 | 8.70 | 2.96 | 11.66 |
| Q2 2014 | 8.62 | 3.02 | 11.64 |
| Q3 2014 | 8.64 | 3.07 | 11.71 |
| Q4 2014 | 8.68 | 3.16 | 11.84 |
| Q1 2015 | 8.68 | 3.17 | 11.85 |
| Q2 2015 | 8.62 | 3.24 | 11.86 |
| Q3 2015 | 8.75 | 3.31 | 12.06 |
| Q4 2015 | 8.74 | 3.37 | 12.11 |
| Q1 2016 | 8.86 | 3.39 | 12.25 |
| Q2 2016 | 8.84 | 3.45 | 29.12 |
| Q3 2016 | 8.82 | 3.54 | 12.36 |
| Q4 2016 | 8.95 | 3.63 | 12.58 |
| Q1 2017 | 9.09 | 3.64 | 12.73 |
| Q2 2017 | 9.14 | 3.69 | 12.83 |
| Q3 2017 | 9.19 | 3.77 | 12.96 |
| Q4 2017 | 9.32 | 3.82 | 13.14 |
| Q1 2018 | 9.38 | 3.85 | 13.23 |
| Q2 2018 | 9.43 | 3.87 | 13.30 |
| Q3 2018 | 9.56 | 3.95 | 13.51 |
| Q4 2018 | 9.53 | 4.01 | 13.54 |
| Q1 2019 | 9.65 | 4.02 | 13.67 |
| Q2 2019 | 9.81 | 4.06 | 13.87 |
| Q3 2019 | 9.84 | 4.13 | 13.97 |
| Q4 2019 | 9.95 | 4.20 | 14.15 |
| Q1 2020 | 10.10 | 4.21 | 14.31 |
| Q2 2020 | 10.15 | 4.12 | 14.27 |
| Q3 2020 | 10.22 | 4.14 | 14.36 |
| Q4 2020 | 10.39 | 4.17 | 14.56 |
| Q1 2021 | 10.50 | 4.14 | 14.64 |
| Q2 2021 | 10.76 | 4.20 | 14.96 |
| Q3 2021 | 10.99 | 4.24 | 15.23 |
| Q4 2021 | 11.25 | 4.34 | 15.59 |
Source: Federal Reserve
Trends in housing debt
Property prices have come under upward pressure since the start of the COVID-19 pandemic. This is evidenced by the Case-Shiller US National Home Price Index, which is up by 34% since the beginning of the pandemic.
Various pandemic-related effects are driving this growth. For example, the cost of materials like lumber has seen tremendous spikes. We covered this story in a previous chart showing how many homes could be built with $50,000 worth of lumber. In most cases, these higher costs are passed on to the consumer.
Another important factor is here mortgage rates, which fell to an all-time low in 2020. When interest rates are low, consumers can borrow more. This increases the demand for homes, which in turn drives up prices.
Ultimately, higher home prices result in families taking on more mortgage debt.
No reason to worry
Economists believe today’s housing debt is nothing to worry about. This is because borrower quality is much better than it was between 2003 and 2007, the years before the financial crisis and subsequent housing crash.
In the chart below, subprime borrowers (those with a credit score of 620 and below) are represented by the red-shaded bars:
We can see that subprime borrowers represent very little (2%) of today’s total lending compared to the period between 2003 and 2007 (12%). This suggests that American homeowners, on average, are less likely to default on their mortgage.
Economists have also noted a decline Debt service ratio of private households, which measures the percentage of disposable income that goes toward a mortgage. This is shown in the table below along with the average 30-year fixed-rate mortgage rate.
| Year | Mortgage payments as a percentage of disposable income | Average 30-year fixed-rate mortgage rate |
|---|---|---|
| 2000 | 12.0% | 8.2% |
| 2004 | 12.2% | 5.4% |
| 2008 | 12.8% | 5.8% |
| 2012 | 9.8% | 3.9% |
| 2016 | 9.9% | 3.7% |
| 2020 | 9.4% | 3.5% |
| 2021 | 9.3% | 3.2% |
Source: Federal Reserve
While it’s true that Americans are less burdened by their mortgages, we have to acknowledge the fall in mortgage rates that has occurred over the same period.
With the Fed now raising rates to calm inflation, Americans could see their mortgages eat up a bigger chunk of their paychecks. In fact, mortgage rates have risen for seven straight weeks.
Non-home consumer debt trends
The key stories in consumer non-home debt are student loans and car loans.
The former category of debt has grown significantly over the past two decades, with growth slowing during the pandemic. This is due to COVID relief efforts that temporarily lowered the interest rate direct federal student loans to 0%.
Additionally, those loans were deferred, meaning 37 million borrowers did not have to make payments. As of April 2022, the value of these payments waived has reached $195 billion.
During the pandemic, very few direct federal borrowers have made voluntary payments to reduce their loan amount. When payments eventually resume and the interest rate resets from 0%, economists believe arrears could increase significantly.
Car loans, on the other hand, follow a similar development as mortgages. Both new and used car prices have risen due to global chip shortages, which is hampering production across the industry.
To put this in numbers, the average price of a new car has gone up $35,600 2019 over $47,000 today. Over a similar period of time, the average price of a used car has increased $19,800over $28,000.
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