Author Topic: U.S. household debt stands at record $14.15 trillion  (Read 2297 times)

iris lily

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U.S. household debt stands at record $14.15 trillion
« on: February 18, 2020, 12:42:58 PM »
U.S. households have been racking up the debt! With financial markets throwing off unprecedented gain and putting money into everyone’s accounts, that is an awesome accomplishment indeed!  This is all according to Federal Bank of New York.

Since mortgage debt is the main driver, perhaps those of you who do not like paying down mortgages will not be concerned.

Also, I guess an argument could be made that a household could simultaneously be in the black in their financial accounts but still be in a bigger red margin on the debit side.

But me, I do not like this news.

I am technically unable to link to the two best articles with good graphs, so the one below is the best I can do.

https://www.investopedia.com/household-debt-tops-usd14-trillion-for-the-first-time-ny-fed-says-4795862

RWD

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #1 on: February 18, 2020, 12:49:07 PM »
So $110k per household, including mortgages? And that's the mean, not the median. How does this compare to debt/household in the past, adjusted for inflation?

Just Joe

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #2 on: February 18, 2020, 12:56:35 PM »
So are we prepping for another 2008?

DadJokes

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #3 on: February 18, 2020, 01:02:39 PM »
If this includes mortgage debt, that doesn't seem too bad. At 128.58 million households in the US, that comes out to $110k debt per household. Mine is nearly double that simply because of our mortgage.

Simply based on the fact that this is apparently the highest level ever, despite also being a decade into a bull market, it's probably a little concerning.

SimpleCycle

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #4 on: February 18, 2020, 01:09:40 PM »
Debt will always increase because of inflation in home, auto, and tuition prices.  Even if Americans paid down ALL their credit card and "other" debt, we'd still top 2008 records.  I don't know why this is always reported in nominal dollars.  I guess because "total debt burden increased slower than inflation" is not a catchy headline.

JLee

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #5 on: February 18, 2020, 01:11:44 PM »
If this includes mortgage debt, that doesn't seem too bad. At 128.58 million households in the US, that comes out to $110k debt per household. Mine is nearly double that simply because of our mortgage.

Simply based on the fact that this is apparently the highest level ever, despite also being a decade into a bull market, it's probably a little concerning.

Houses are getting more and more expensive, so I can't say I'm surprised.

RWD

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #6 on: February 18, 2020, 01:15:08 PM »
Peak 2008 total household debt was $12.68 trillion or $108.6k per household. Adjusting for inflation that would be $130k per household (18.2% higher than this month's "record").

slugline

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #7 on: February 18, 2020, 01:22:23 PM »
Simply based on the fact that this is apparently the highest level ever, despite also being a decade into a bull market, it's probably a little concerning.

One person's debt is another person's asset.

Villanelle

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #8 on: February 18, 2020, 01:36:07 PM »
I have far more debt than average. 

I also have two leveraged rental properties, a net worth of of about 7 figures, and those properties operate well in the black. 

So I guess I'm a but part of the "problem"? 

I think consumer debt is a much more meaningful number.  Or consumer and student debt, at least. 

fattest_foot

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #9 on: February 18, 2020, 03:24:54 PM »
One person's debt is another person's asset.

Reminds me of something I saw a few weeks ago about how the world was $x trillions (some astronomical number) in debt. I'm sitting there like, "How is that possible? Someone has to own that debt."

Do we owe some alien culture a bunch of money?

Villanelle

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #10 on: February 18, 2020, 04:31:13 PM »
One person's debt is another person's asset.

Reminds me of something I saw a few weeks ago about how the world was $x trillions (some astronomical number) in debt. I'm sitting there like, "How is that possible? Someone has to own that debt."

Do we owe some alien culture a bunch of money?

Because the don't count assets.  That's not net worth.  So they are only showing one side of the equation.  If I am $300k in debt, they count that.  It I am also have $1m in assets, or in net worth after that $300k is subtracted, they are still counting my debt.  And only my debt. 

DadJokes

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #11 on: February 18, 2020, 07:54:06 PM »
It's only an asset as long as the debtor can pay.

That was the problem in 2008. People stopped paying.

aspiringnomad

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #12 on: February 18, 2020, 10:29:20 PM »
U.S. households have been racking up the debt! With financial markets throwing off unprecedented gain and putting money into everyone’s accounts, that is an awesome accomplishment indeed!  This is all according to Federal Bank of New York.

Since mortgage debt is the main driver, perhaps those of you who do not like paying down mortgages will not be concerned.

Also, I guess an argument could be made that a household could simultaneously be in the black in their financial accounts but still be in a bigger red margin on the debit side.

But me, I do not like this news.

I am technically unable to link to the two best articles with good graphs, so the one below is the best I can do.

https://www.investopedia.com/household-debt-tops-usd14-trillion-for-the-first-time-ny-fed-says-4795862

The only context provided in that article is that it's the first time in history that household debt has surpassed $14 trillion. Not super helpful, but perhaps additional context will help to frame it.

It means that on average* each American has 27% less in household debt -- including mortgages, HELOCs, student loans, and credit cards -- than they earn in just one year. That's not bad even by the standards of this forum. As you note, given the importance of mortgages to the equation, it tends to reflect homeownership rates and real estate prices. Canadians, again on average, owe just about exactly as much as they earn in a year. Australians owe 20% more than they earn in a year. So things could certainly be debtier than they are in the US!

*The median would paint a less rosy picture given the level of income inequality these days.

dignam

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #13 on: February 19, 2020, 06:54:44 AM »
Peak 2008 total household debt was $12.68 trillion or $108.6k per household. Adjusting for inflation that would be $130k per household (18.2% higher than this month's "record").

Why isn't THIS reported?  This is far more valuable information.

RWD

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #14 on: February 19, 2020, 07:06:18 AM »
Peak 2008 total household debt was $12.68 trillion or $108.6k per household. Adjusting for inflation that would be $130k per household (18.2% higher than this month's "record").

Why isn't THIS reported?  This is far more valuable information.

Because it doesn't make for sensationalist headlines, probably. I agree, total debt is a very useless metric. All you need is a bunch of inflation or increase in population for it to grow. Or imagine if 100 million people emigrated to Canada/Mexico (yay, debt went down by a third!). The inflation adjusted per household debt I calculated above is a better metric as you can actual compare values reasonably. However, it still has some problems since it is the mean average and not median so the super rich who have super mortgages drastically pull up the average. I'd love to see a graph of median debt per household adjusted for inflation over time, preferably tracked with median net worth. And maybe some lines for showing quartiles as well. Then we would actually have some data worth talking about.

DadJokes

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #15 on: February 19, 2020, 07:10:43 AM »
2008 was also the worst recession since the Great Depression. I wouldn't want that to be the bar we set for when debt is too high.

I think consumer debt is a more important thing to look at than total debt, however.

RWD

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #16 on: February 19, 2020, 07:40:01 AM »
I found this chart from a year ago, though it's a bit hard to read. The February 2020 total debt not associated with a house or student loans is ~$2.7 trillion (about $21k per household). Again, we're talking mean not median.

RWD

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Re: U.S. household debt stands at record $14.15 trillion
« Reply #17 on: February 19, 2020, 07:46:34 AM »
I found this chart from a year ago, though it's a bit hard to read. The February 2020 total debt not associated with a house or student loans is ~$2.7 trillion (about $21k per household). Again, we're talking mean not median.

I found the source for the graphic I posted and it has an interactive graph that shows you the splits between the different debt for any quarter between 2004 Q1 and 2019 Q4. $2.08 trillion for credit card, auto, and other debt in 2008 Q3 which is $2.5 trillion in 2020 dollars. Interesting to note that non-housing debt barely dipped at all in the recession.
https://www.newyorkfed.org/microeconomics/hhdc.html
« Last Edit: February 19, 2020, 07:54:36 AM by RWD »