Thursday, February 16, 2017

NY Fed: Household Debt Increases Substantially, Approaching Previous Peak

by Bill McBride on 2/16/2017 11:22:00 AM

The Q4 report was released today: Household Debt and Credit Report.

From the NY Fed: Household Debt Increases Substantially, Approaching Previous Peak

he Federal Reserve Bank of New York today issued its Quarterly Report on Household Debt and Credit, which reported that total household debt increased substantially by $226 billion (a 1.8% increase) to $12.58 trillion during the fourth quarter of 2016. This marked the largest quarterly increase in total household debt since the fourth quarter of 2013, and debt today is now just 0.8% below its peak of $12.68 trillion reached in the third quarter of 2008. Every type of debt increased since the previous quarter, with a 1.6% increase in mortgage debt, 1.9% increase in auto loan balances, a 4.3% increase in credit card balances, and a 2.4% percent increase in student loan balances. This boost in balances was in part driven by new extensions of credit, with a large increase in the volume of mortgage originations and a continuation in the strong recent trend in auto loan originations. This report is based on data from the New York Fed's Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.
...
Mortgage balances increased and mortgage originations reached the highest level seen since the beginning of the Great Recession.

Mortgage delinquencies remained mostly unchanged and the delinquency transition rates for current mortgage accounts improved slightly.

New foreclosure notations reached another new low for the 18-year history of this series.
...
Overall delinquency rates were roughly stable this quarter.

This quarter saw the lowest number of bankruptcy notations in the 18-year history of this series, continuing an overall downward trend since the financial crisis.
emphasis added
Total Household Debt Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased in Q4.  Household debt peaked in 2008, and bottomed in Q2 2013.

Mortgage debt increased in Q4, from the NY Fed:
Mortgage balances, the largest component of household debt, increased during the fourth quarter. Mortgage balances shown on consumer credit reports on December 31 stood at $8.48 trillion, an increase of $130 billion from the third quarter of 2016.
Delinquency Status The second graph shows the percent of debt in delinquency. There is still a larger than normal percent of debt 90+ days delinquent (Yellow, orange and red).

The overall delinquency rate was mostly unchanged in Q4.  From the NY Fed:
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”).