The amount of debt held by American households grew once again in 2017, continuing to surpass debt levels from before the 2008 financial crisis. Not surprisingly, mortgage debt is the largest component of household debt, rising by $139 billion in the fourth quarter of 2017. While mortgage, student loan, auto loan, and credit card debt increased in 2017, home equity lines of credit declined somewhat.
Overall mortgage debt increased $402 billion during 2017, now standing at $8.8 trillion. Student loan debt increased $68 billion to $1.38 trillion, auto loan debt increased $64 billion to $1.22 trillion, and credit card debt increased $55 billion to $834 billion. Total household debt increased $572 billion to $13.15 trillion.
While non-mortgage debt levels remain higher than 2008 levels, mortgage debt remains 4.4% below pre-crisis highs. That isn’t necessarily an indicator of a healthy housing market or lack of a housing bubble, however.
The highly-publicized difficulties that millennials face in purchasing houses may very well be keeping overall mortgage debt lower than it otherwise would be, while other generational cohorts continue to take on more debt than they should. One worrying sign is that the median credit score for new mortgage borrowers decreased, an indicator of worsening loan quality.
Auto loans continue to increase, a trend that has been going on for over six years. And while the overall delinquency status of loans is far lower than it was during the financial crisis, it still remains above pre-crisis levels.
Overall, the levels of debt taken on by American households are a worrying sign that Americans didn’t learn their lesson from the financial crisis. Rather than paying down their loans and reducing their debt exposure, Americans are more addicted to debt than ever. The next time a financial crisis occurs, most American households will find themselves just as indebted as they were during the last financial crisis, and many will struggle to keep themselves afloat.