Household Debts Ratio Are Lowest Since 1990s
The chart above displays Federal Reserve data on: a) the quarterly household debt service ratio (red line), which is the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt; and b) the quarterly financial obligations ratio, which adds automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance, and property tax payments to the debt service ratio (blue line).
The debt service ratio was 11.75% in the last quarter of 2010, which is the lowest ratio since the first quarter of 1998, and the financial obligations ratio at 16.64% in Q4 2010 was the lowest since the first quarter of 1995.
Explanations? Thoughts?
Fewer home owners? Folks paying off credit cards? Fewer people eligible for borrowing? Refinancing?
ReplyDeleteDeleveraging improving
ReplyDeletei suspect this has a great deal to do with foreclosures and cram downs.
ReplyDeleteevery time there is a REO sale, this number drops.
non housing related debt declined less than 1%.
it's certainly not being driven by income...
Setting up a sustained bull market, domestically and globally.
ReplyDeleteThings are falling into place, albeit slowly.
This is certainly good news. It is great that the people in the U.S. are reducing their debt loads.
ReplyDeleteNow if we could just get the politicians to do the same for public debt.
mostly due to foreclosures & credit card balance written of by the banks...
ReplyDeleteAlso, the banks will not make new loans.
ReplyDeleteLosing your $60,000 job, house, car, credit cards, etc. will reduce monthly payments.
ReplyDeleteAnd then when you get your job at McDonalds for $20,000, you don't have to worry about a mortgage, a car payment, credit cards, etc.
Actually, people are reacting fairly rationally. Of the $6 Billion increae in Consumer Credit last month, about 80% was in Student Loans.
ReplyDeleteThe Bubbas, and Bubbettes are out getting "new skills."
Mobs (and governments) may be irrational, but individuals are pretty sensible.
Refinancing housing?
ReplyDeleteZillow: See the Worst Home Prices Drop Since 2008
Declining loan volumes, tighter credit, deleveraging, the refinancing boom that ended last year, foreclosures, charge offs, low demand for loans, rising interest rates, uncertainty, high unemployment - the usual suspects.
ReplyDelete