Here’s the hyper-financialization of mortgages in pictures. In just three years mortgage debt has soared despite plunging home sales.
Hyper-Financialization of Mortgages Key Points
- In 2000 Q1 total mortgage debt was $4.50 trillion. The top 1 percent had only $0.20 trillion. The top 10 percent had $0.88 trillion. The 50-90 percentile had $2.17 trillion in debt, and the bottom 50 percent had $1.23 trillion in mortgages.
- In 2008 Q1 total mortgage debt soared to was $10.70 trillion. The top 1 percent had only $0.38 trillion. The top 10 percent jumped from $0.88 trillion to 2.25 trillion. The 50-90 percentile more than doubled from $2.17 trillion in debt to $4.6 trillion. The bottom 50 percent total jumped from 1.23 trillion to $3.52 trillion.
- Consumers deleveraged between 2008 Q1 to 2015 Q1 as mortgage debt fell from $10.70 trillion to $9.35 trillion. Mortgage debt in the bottom 50% fell from $3.52 trillion to $2.48 trillion accounting for most of the decline. The decline is a combination of walking away from mortgages, bankruptcies, and slow paydown of mortgage debt.
- There is very little change between 2008 Q1 and 2020 Q1 as the slight deleveraging from 2008 Q1 to 2015 Q1 morphed into slight leveraging between 2015 Q1 and 2020 Q1. However, the mortgage debt in the bottom 50 percent fell again to $2.33 trillion.
Home Mortgages by Wealth Percentile 2020-2024
Hyper-Financialization of Mortgages 2020-2024 Details
- Starting 2021 Q1 there was an 18.9 percent surge in mortgage debt from $10.99 trillion to $13.07 trillion, a jump of 2.08 trillion.
- None of surge was by the top 1 percent which nearly always pays cash. Mortgage debt actually decreased slightly in this period from $0.45 trillion to $0.39 trillion.
- The 50-90 percentile lead the charge with $1.00 trillion in mortgage debt. The 90-99 percentile added $0.51 trillion while the bottom fifty percent added $0.62 trillion.
Existing Home Sales Drop 5.4 Percent But Median Price Hits New Record
On July 23, 2024, I noted Existing Home Sales Drop 5.4 Percent But Median Price Hits New Record
Sales are down 38.6 percent from the January 2022 high. All-cash sales accounted for 28% of transactions in June, unchanged from May and up from 26% one year ago.
Sales have crashed and all-cash sales are over a quarter of the sales, yet mortgage debt has risen a whopping 18.9 percent in just three years.
A $150,000 House in 1988 Now Costs $707,500
To understand the surge in mortgage debt, please note A $150,000 House in 1988 Now Costs $707,500 Thank You Fed
The Fed has grossly distorted the housing market and no fix is in sight.
Credit Card and Auto Loan Delinquencies Surge in the Second Quarter
Yesterday, I noted Credit Card and Auto Loan Delinquencies Surge in the Second Quarter
Over ten percent of credit card outstanding debt is over 90 days delinquent. Banks will be curtailing credit.
A very painful period of deleveraging is about to begin.
Makes sense. New buyers are paying through the nose for rates and prices haven’t dipped yet.
Bank of America CEO says research team ‘does not have any recession predicted anymore’https://thehill.com/business/4822935-bank-of-america-ceo-says-research-team-does-not-have-any-recession-predicted-anymore/
Example:I flew into Las Vegas circa 2007, and was astounded by the view on approach–mile after mile of suburban roads covered by sand (no houses though). It was surreal.This is classic price elasticity at work as supply and demand change–it
takes time to build a house/development–there is no spigot to turn off, so the unsold houses (or roads) remain. Many cities had unfinished office towers for a couple of years.
St. Louis FRED data suggest a continued decline in home sales, but not prices. House prices have a tendency to be sticky at the start of a downhill run. Locked-in long-term mortgages at low interest rates increase the pain threshold (to motivate sellers), increasing the impact on supply.
So far, no surprises (black swans?) for the early stage of recession.
“Total Outstanding Mortgage Debt Increased 18.9 Percent in Three Years”
And: This new; even more orders of magnitude too high than before; level of pumped up idiocy, must then; per the complete and utter illogic of the retarded-to-the-point-of-being-depicable, well indoctrinated idiot classes; be effectively maintained. Lest the “financial syyyystem collaaaaapses.”
Since, being complete idiots; and only, solely, 100% due to being complete idiots; the indoctrinati still manage to fall for the trivially obvious; to anyone with even a frutfly’s brain; idiocy that any part at all of the current “financial syyystem” is; in any way at whatsoever; something which has ANY value at all.
Never mind it serves NO purpose. Never mind Every.Single.Idiot who; in any way; benefits from it not collapsing, being completely useless at absolutely everything and being just a pure boat anchor around the ankles of anyone not such a pure negative nothing. And never mind it serving NO other purpose than pure, 100%, crass wealth transfers: From potentially literate and productive beings; To the very dumbest and most useless of all possible ranks idiots. Without serving any redeeming purpose, in any way whatsoever, in return.
But while others may have conflicts of interest in reporting on this most important topic, we don’t, and we are sad to inform our readers that July was another catastrophic month for US fiscal viability: that’s because US tax revenue of $330.4BN (down sharply from the $466.3BN in June, if higher than the $276.2BN a year ago), was far below the $573.1BN in government outlays (which was materially above the $537.2BN in June and also the $496.9BN last July)…
…. resulting in a monthly deficit of $243.7BN, the second largest July budget deficit on record, surpassed only by the record post-covid print in July 2021.
https://www.zerohedge.com/markets/july-budget-deficit-2nd-biggest-history-25-tax-revenue-go-pay-interest
Awesome!
300 BigLots stores are closing. That’s at least 6000 jobs lost. Consumers are pulling back, and thefts have increased.
A pal of mine, modest income, not much savings, says that they are catching shoplifters left and right in his job of security at a local food store.
do they allow them to finish eating before releasing
The poor will be with you always even to the end of the Earth because they take out mortgages they cannot afford.
all this demonstrates is the REAL devaluation of fiat $dollar
it’s ‘growth’ my friends – govt style/stealing
Mortgage rates started going up in Jan. of 2022, but that did not stop the price increases. The wackiness was just getting started.
Since 2020, home prices are up 50% nationally. 70% in Tennessee. 100% in Knoxville. That’s wacky.
Housing in Connecticut has gone parabolic since Jan. 2022. Per Redfin, median price in CT has gone from 321K to 478K.
When the Fed cuts rates things will go from wacky to over-the-top insane.
But history says the exact opposite will happen. The Fed only cuts rates when the bond market is telling it that it kept rates too high for too long and triggered runaway job losses.
ANDDDDDD…they will cut.
Maybe because Tennessee housing was cheap (comparatively) and has zero income tax.
Mish, do you have any data on HELOCs over the same period? Just curious.
Debt all over is clearly not in a good place. What could possibly go wrong with this kinda setup?
Of course the top two tiers have no change. They want it, they outright buy it sans mortgage. Everyone else have to finance, so the hits are obvious.
It’s also quite possible that the top 2 tiers move less often than the bottom tiers and thus haven’t been as affected simply because they haven’t bought much lately.
“So should the average investor be buying REITs right now…..or a LOT of REITs?” -CNBC, probably
Mike, how do your wealth percentiles range out in USD values? Reading this article helps me feel better having refi’d at 3% and NO cash out, etc. Pretty intense leverage going on.
I don’t know the average mortgage by percentile, if that is what you are asking. Not sure that would be meaningful. It could be huge for the top 1% if they have a mortgage, but clearly very few of them do.
But yes, refinancing at 3% was very smart. That put extra money in your pocket every month.
Mish, I think Bill may be asking what income ranges correspond to the wealth percentiles. For example, the percentile range of 99% and up may be folks making greater than $500k?
Wealthy people DO use Mortgages for Balances above $5Million. My wife’s Uncle has NOTHING but cash and he bought his horse ranch using “other people’s money.”
Granted: his ranch is a source of income (breeder and also he allows locals to keep their horses on his property and they pay him A LOT).
Uncle K has 750,000 in Cash and Stocks/Bonds, etc.
He just rotated to CASH and sold ALL of his stock holdings.