The financial crisis of over a decade ago is now behind us. For many, it is not much more than a distant memory. Although the causes and possible preventions have been theorized about and discussed extensively, and will be for future generations, there is no question that the underlying dynamic was the real estate asset bubble fueled by debt.
Leading up to the crisis beginning in 2008, household debt had been outpacing disposable income growth for several years. Household debt reached 100% of GDP, and household debt was 140% of household income (see series of graphs below).
The Federal Reserve Bank of New York’s Center for Microeconomic Data’s issued a recent report that indicates that household debt has now surpassed 2008 levels. The report states “total household debt increased by $192 billion (1.4 percent) to $13.86 trillion in the second quarter of 2019. It was the twentieth consecutive quarter with an increase, and the total is now $1.2 trillion higher, in nominal terms, than the previous peak of $12.68 trillion in the third quarter of 2008.”
Mortgage balances comprise the largest share of household debt. Again, quoting from the report “the largest component of household debt (mortgage balances) rose by $162 billion in the second quarter to $9.4 trillion, just higher than the previous high of $9.3 trillion from the third quarter of 2008. Non-housing balances increased by $37 billion in the second quarter, with a $17 billion increase in auto loan balances and a $20 billion increase in credit card balances offsetting an $8 billion decline in student loan balances.”
The Fed’s current data on delinquencies is somewhat of a mixed-bag, with mortgage asset quality improving and other forms of consumer credit worsening. Commentary from Fed staff can be found here.