Consumers across America embarked on unprecedented shopping sprees last year, causing total household debt to jump by $1 trillion— the sharpest increase in nearly 15 years.
According to the Federal Reserve Bank of New York’s latest Household Debt and Credit Report, total household debt in the US ballooned to $15.58 trillion last year— the most since 2007, as consumers rushed to buy real estate and vehicles. Mortgage balances accounted for majority of the increase, rising by $258 billion in just the fourth quarter of last year. For the entirety of 2021, consumers borrowed about $4.5 trillion in mortgages, the largest such amount since 1999.
The second-biggest component of household debt were vehicle loans, which rose $181 billion in the final three months of 2021; however, the increase was largely due to Americans purchasing more costly cars, rather than a higher quantity of cars. The report attributes the increase in car-loan borrowing to skyrocketing prices for vehicles, as carmakers faced global supply chain disruptions and semiconductor shortages.
Many American households last year faced substantial financial hardships, with inflation levels reaching 7% in December— the biggest jump in prices in almost 40 years. To make matters worse, median income slumped 3%, forcing consumers to pay even more for basic necessities, such as food and energy.
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Information for this briefing was found via the Federal Reserve Bank of New York. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
