Consumer Debt Picture

While I am hugely concerned over the state and complexion of present debt in the system, the issues are not concentrated in residential real estate this go round:

We did, however, see an increase in mortgage delinquency rates in Q4, although it’s not a scary look at this point:

Click each insert below to enlarge (red shaded areas highlight the 2008 recession):

Per Bespoke’s breakdown of the latest on consumer debt, folks are definitely ramping up the use of their credit cards, and are financing their auto purchases at an increasing rate (the areas I emphasize below merit close monitoring):

The New York Fed released its Q4 update on consumer (including mortgage and home equity line of credit) debt growth and levels. 

• Overall debt rose at a 4.6% annual rate after seasonal adjustment or 4.4% YoY, driven by a huge surge in credit card lending: balances in that sector rose at the fastest pace since Q2 of 2007, up 12.8% annualized or 6.5% YoY.

• While the home equity line of credit market continues to shrink both nominally and relative to overall consumer debt, all other forms of debt continued to rise.

• Auto lending also accelerated with loans backed by cars and trucks moving up by 5.5% annualized on the quarter.

• At 4.75%, YoY mortgage balances rose at the fastest pace since Q2 of 2008 amidst a huge quarter for refinancings thanks to Federal Reserve rate cuts.

• As a share of total household debt, mortgages have stabilized at a bit less than 70%, while student loans as a share of total debt fell for just the third time since 2008.

• The growth rate of student loans on a y/y basis was just 3.5%, a record low; quarterly growth rate was the slowest on record other than one wildcat decline in balances back in 2011.

While I didn’t emphasize (above) the pace of auto loan growth as a concern (it says bullish things about consumer sentiment), the current delinquency rate in that space absolutely is: 

As for credit card issuance now rivaling Q2 2007, while that comparison is of course troubling, couple it with the latest directional trend in delinquencies and, well, again, it’s something we’ll be monitoring closely:


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