Measuring Increases in Mortgage Debt

Mortgage debt is at an all time high as home prices rise to record levels, according to a report from HowMuch.net. According to the U.S. Census Bureau, the median home value in the U.S. was $30,600 in 1940 (adjusted for inflation). By 2017, that number was $193,500. With home prices so high, outstanding mortgage debt is 284 times greater in 2018 than it was in 1949.

Total mortgage debt first exceeded $1 trillion in 1977, but the largest increase in mortgage debt year-over-year occurred from 1949 to 1950, when mortgage debt increased by more than 50%. Additionally, from 2008 to 2012, during the height of the Great Recession, total mortgage debt in the U.S. actually decreased every year, dropping from $14.69 trillion in 2008 to $13.34 trillion in 2013.

Mortgage debt and delinquencies make up a large portion of household debt. According to the Federal Reserve Bank of New York, severely derogatory balances are now half of all delinquencies.

“Although the housing crisis produced a huge increase in severely derogatory mortgages, that effect has dissipated as the foreclosure pipeline has cleared out in even the slowest states,” the Fed states. “Today, auto and especially student loan balances are the interesting components: in the second quarter of this year, the outstanding severely derogatory balance is comprised of 35 percent defaulted student loans, which have grown stunningly since 2012.”

According to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York, total household debt increased by $192 billion (1.4%) to $13.86 trillion in the second quarter of 2019. This is the 20th consecutive quarter with an increase the Fed’s Center for Microeconomic Data notes.

HowMuch.net notes that even though the mortgage debt is the highest in history, long-term interest rates are close to historical lows. Mortgage demand, despite record-low rates, seems unable to grow since home prices are still out of reach for many Americans.