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Friday, July 27, 2007

BEA: Q2 Mortgage Debt Increase

by Calculated Risk on 7/27/2007 06:46:00 PM

Note: This is an estimate of the total increase in household mortgage debt, not to be confused with MEW (Mortgage Equity Withdrawal or extraction). MEW is a subset of this amount. The gold standard for net equity extraction is the Kennedy-Greenspan data usually available, courtesy of Dr. Kennedy, a few days after the Fed's Flow of Funds report is released. For Q2 2007, the Flow of Funds report is scheduled to be released on September 17, 2007.

As a supplement to the advance GDP report (released today), the BEA provides an estimate of mortgage interest paid for the quarter, and the effective mortgage interest rate. With a little work, an estimate of the total increase in mortgage debt for the quarter can be derived.

BEA Estimate of Mortgage DebtClick on graph for larger image.

This graph shows the quarterly increase in household mortgage debt based on the Fed's Flow of Funds report compared to the BEA derived increase in mortgage debt. Note that the BEA data is Seasonally Adjusted (SA) and the Flow of Funds data is Not Seasonally Adjusted (NSA).

NOTE: It is difficult to compare NSA vs. SA data. In this case, the current quarter (Q2) appears to have the least seasonal adjustment. Use with caution: my confidence in this analysis for any single quarter is not high.

The BEA data suggests that total household mortgage debt increased by $188 Billion in Q2. If this estimate is close, this suggests that MEW increased in Q2 - possibly boosting consumer spending. If this advance estimate is correct, this will be a surprise - an understatement - and raise even more concerns about consumer spending later this year.