Household debt hit another all-time high in the fourth quarter as student and auto loan balances surged to new heights and outstanding mortgage balances climbed to levels not seen since 2009.
In its quarterly report on household debt and credit, released Tuesday, the Federal Reserve Bank of New York said that total outstanding consumer debt climbed to a record $13.15 trillion at Dec. 31, up 1.5% from the prior quarter and 4.5% from a year earlier. The New York Fed said that 2017 was the fifth consecutive year in which household debt increased.
This latest surge was driven largely by a sharp increase in mortgage balances. Total outstanding mortgage balances increased by 4.7% year over year, to $8.88 trillion, according to Fed data. The last time mortgage balances were at those levels was in late 2009, and the year-over-year increase was the largest in more than a decade.
But that growth has been uneven, Fed officials said Tuesday. In some states, mortgage balances surpassed their 2008 peaks by 10% or even more, while in others harder hit during the financial crisis, balances remained well below their 2008 peaks.
Texas, Oklahoma, Louisiana, Colorado, Utah, North Dakota and South Dakota are among the states where mortgage balances are now at all-time highs.
California, Florida, Nevada, and Arizona, are among the states where balances are still below peak levels.
“Despite recovered house prices, mortgage balances remain far below their previous peaks in the states that were hardest-hit by the Great Recession,” Donghoon Lee, research officer at the New York Fed, said in a press release. “While the subdued mortgage balance levels of these areas should not necessarily be interpreted as a negative outcome, the regional differences clearly show that the echoes of the financial crisis still linger.”
Lynn Fisher, the vice president of research and economics at the Mortgage Bankers Association, said that those states with the greatest recoveries in mortgage balances are the same states that have seen the greatest appreciation in home prices since the recession. In those areas, a lack of inventory has put upward pressure on home prices, leading to affordability concerns for buyers and forcing some lenders to relax underwriting standards a bit.
Some lenders, for instance, have been making accommodations for millennial borrowers who are more often burdened by student loan debt. The New York Fed noted that the median credit score for newly originated borrowers had declined slightly, from 760 to 755.
“Because affordability is becoming a problem, people are reaching for more and more debt to be able to afford homes,” Fisher said.
Fisher also said that most states where home prices have yet to fully rebound are still doing well economically.
“Florida is not back to peak housing prices, but their economy is doing just fine. They’re still working through that excess capacity in some places and in other cities we’re seeing quite strong pickup,” she said. “Some of this is about timing and some of this is about fundamental economic differences in some places.”
While mortgage debt has consistently made up the greatest share of consumer debt, student loans and auto loans have risen at a faster clip and now account for a greater percentage of total household debt than they did in 2008. Auto loans now make up 9.3% of total household debt, compared with 6.4% in 2008, and student debt has more than doubled as a share of total household debt, from 4.8% in 2008 to roughly 10.5% today.
Student debt ticked up 5.2% year over year to a record $1.4 trillion, while auto loans climbed 5.5% to $1.2 trillion. Credit card debt rose 7.1% to $834 billion, but as a share of total household debt, it has actually declined somewhat from 2008 levels, to 6.3%. Of all the types of household debt the agency tracked in its report, only home equity lines of credit have been declining.