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Has Household Deleveraging Continued?
Posted By Guest Author On August 31, 2012 @ 6:00 am In Think Tank | Comments Disabled
Just Released: Has Household Deleveraging Continued?
Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw
August 29, 2012
First, we’ll focus on the change in nonmortgage debt—such as credit cards, student loans, and auto loans—stripping out the effects of charge-offs. The data are slightly revised from what we originally posted in March 2011, in which the nonmortgage debt change dipped slightly into negative territory in 2009. The revision is due to the inclusion of our improved data on student loan balances , which were previously underestimated. Still, the data indicate a change in behavior. From 2000 until 2007, consumers were adding an average of $212 billion per year to their outstanding debt balances; in 2009, new consumer borrowing dropped to $14 billion. In 2010 and 2011, new consumer borrowing partially recovered; but in 2011, debt less charge-offs increased by only $138 billion, still below the 2000-07 average.
Interestingly, the chart below reveals that the trends are starkly different for various loan types; consumers actively reduced debt for consumption-related expenditures for both 2009 and 2010, but new borrowing for education was fairly constant throughout the period.
Moving to debt secured by real estate, we see that in spite of some slight revisions, the story looks more or less the same as what we saw last spring. We explained in our earlier blog post why the decomposition is more complicated for mortgage charge-offs. Consumers continued paying down their mortgage debt, even at a faster rate, during 2010 and 2011. Using the same framework we described in our earlier blog post, we break the change in debt outstanding into three components, which add up to the line in the chart below.
When we combine nonmortgage and mortgage debt, we find that the active reduction of debt continued in 2010 and 2011. We conclude that while nonmortgage debt rebounded somewhat in 2011, household deleveraging continued, primarily as homeowners continued to pay down their housing debt.
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2012/08/has-household-deleveraging-continued/
URLs in this post:
 2012Q2 Quarterly Report on Household Debt and Credit: http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q22012.pdf
 post: http://libertystreeteconomics.newyorkfed.org/2011/03/have-consumers-become-more-frugal.html
 accompanying interactive charts: http://www.newyorkfed.org/householdcredit/
 our improved data on student loan balances: http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q32011.pdf
 Image: http://libertystreeteconomics.typepad.com/.a/6a01348793456c970c017744627230970d-popup
 Image: http://libertystreeteconomics.typepad.com/.a/6a01348793456c970c0176177beba1970c-popup
 Image: http://libertystreeteconomics.typepad.com/.a/6a01348793456c970c0176177bece7970c-popup
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