23 July 2019

U.S. Household Debt Increases

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Americans made more progress in repairing their postrecession finances and have increased their overall borrowing, yet they are also showing an aversion to credit cards and new mortgages that could hinder the economic recovery.

Household debt—including mortgages, credit cards, auto loans and student loans—rose $129 billion between January and March to $11.65 trillion, new figures from the Federal Reserve Bank of New York showed Tuesday. That was the third consecutive quarterly increase.

Behind the uptick: Mortgage balances—which make up the bulk of U.S. household debt—rose $116 billion to $8.2 trillion, thanks in part to fewer people going into foreclosure, which drags down mortgage debt. Auto-loan balances grew $12 billion to $875 billion. Student-loan balances increased $31 billion to $1.1 trillion, maintaining its place as the fastest-growing debt category.

Despite all their progress digging out of the downturn, however, U.S. consumers are displaying a heightened wariness about using credit cards or taking out new mortgages.

The amount of credit-card debt outstanding fell to the lowest levels since 2002. Credit-card balances fell $24 billion to $659 billion from the prior quarter, just slightly below the level from a year earlier. New originations of mortgages dropped for the third straight quarter to $332 billion, the lowest since the third quarter of 2011, possibly due to rising home prices in many markets that have made buying less affordable.

The figures suggest Americans are still playing it safe when it comes to borrowing, a practice that should help protect them from longer-run excesses. But the combination of weak demand for credit and slow real wage growth could bode ill for consumer spending, which accounts for more than two-thirds of economic output.

Click here for the full article in the Wall Street Journal.

Related: Vox - Student debt is going up. Graduates' incomes aren't. 

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