Mortgage Debt Continues to Decline

January 3, 2012 (Chris Moore)

American mortgage debt fell to its lowest levels in five years in the third quarter of 2011 as foreclosure activity wiped out home loans and a weak housing market resulted in fewer and smaller loans according to the Federal Reserve’s latest Flow of Funds Report.

Total household debt in the third quarter declined at an annual rate of 1.2 percent, continuing a trend that started in the first quarter of 2008. That compares to a 0.6 percent decline in the second quarter and a 1.8 percent decline in the first quarter.

Total American household debt peaked in the second quarter of 2008 at $13.929 trillion and has declined every month since, reaching $13.208 trillion in the most recent quarter.

Home mortgage debt in the quarter fell at an even faster pace, declining 1.8 percent, down from a 2.4 percent decline in the second quarter and a 2.6 percent decline in the first quarter.

A tepid housing market that has seen prices and sales fall over 30 percent since the market’s peak and a continued elevation in foreclosure activity helped to contribute to a $45.4 billion drop in mortgage debt from the second quarter to the third.

Mortgage debt peaked at $10.611 trillion in the first quarter of 2008 and has declined almost every month since then to $9.875 trillion by the end of the third quarter of this year.

The last time that total amount of mortgage debt was that low was in the fourth quarter of 2006 when total mortgage debt stood at $9.868 trillion.

Total consumer debt, which includes installment payment loans like credit cards and auto loans, has stayed relatively stable during that time. In the fourth quarter of 2006, Americans owed $2.416 trillion in consumer debt. In the third quarter of this year, that amount stood at $2.476 trillion.

Consumer debt has been on the rise in the last year, increasing every quarter for the last four quarters. Consumer debt peaked in the first and second quarter of 2008 at $2.609 trillion.

Tags: Federal Reserve, Flow of Funds, mortgage debt, consumer debt, household debt

Source:
Federal Reserve