by Calculated Risk on 3/10/2005 11:47:00 PM

Today the Federal Reserve released the "Flow of Funds Accounts" for 2004. The report shows that total household mortgage debt increased 13.5% in 2004. The following chart shows the annual rate of mortgage debt increase:


Click on graphs for larger image.

The rate of increase of mortgage debt has increased every year since 1999.

Household mortgage debt increased from $6.64 Trillion in 2003 to $7.54 Trillion in 2004.




The next graph shows the Fed's estimate of the market value of all household real estate and household mortgage debt as a % of GDP.



Although mortgage debt has shown a substantial increase as a % of GDP (almost 20% over the last decade), the estimated value of household Real Estate has also increased substantially.

The appreciating value of household RE has kept the debt to value ratio under 50% based on the Fed's estimates.


The final graph compares the annual increase in mortgage debt to the annual increase in GDP. This shows the impact of mortgage debt on GDP.



The economy was in recession for part of 2001, so it is not surprising that mortgage debt exceeded GDP growth for that year.

However, it is surprising that mortgage debt has substantially exceeded GDP growth for four consecutive years.



This lends credence to the idea that the American consumers are maintaining their lifestyles using their homes as ATMs. Please see these previous posts that expound on this supposition:

Mortgage Debt and the "Recovery"

A Recovery Built on a Marshland of Debt?

Volcker: Circumstances "dangerous and intractable"