In May 2022, Sam Khater—chief economist for Freddie Mac—argued that a surge in first-time buyers had been an important driver of the housing market the previous year. In contrast, using data from the New York Fed Consumer Credit Panel, we find that the share of home purchases by first-time buyers fell in 2021. This suggests that other factors were important to the rapid increase in house prices in 2021.
Total household debt increased by $312 billion during the second quarter of 2022, and balances are now more than $2 trillion higher than they were in the fourth quarter of 2019, just before the COVID-19 pandemic recession, according to the Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. All debt types saw sizable increases, with the exception of student loans. Mortgage balances were the biggest driver of the overall increase, climbing $207 billion since the first quarter of 2022. Credit card balances saw a $46 billion increase since the previous quarter, reflecting rises in nominal consumption and an increased number of open credit card accounts. Auto loan balances rose by $33 billion. This analysis and the Quarterly Report on Household Debt and Credit use the New York Fed Consumer Credit Panel, based on credit data from Equifax.
Tight inventories of homes for sale combined with strong demand pushed up national house prices by an eye-popping 19 percent, year over year, in January 2022. This surge in house prices created concerns that first-time buyers would increasingly be priced out of owning a home. However, using our Consumer Credit Panel, which is based on anonymized Equifax credit report data, we find that the share of purchase mortgages going to first-time buyers actually increased slightly from 2020 to 2021.
The Federal Reserve Bank of New York’s Center for Microeconomic Data today released its Quarterly Report on Household Debt and Credit for the second quarter of 2021. It showed that overall household debt increased at a quick clip over the period, with a $322 billion increase in balances, boosted primarily by a 2.8 percent increase in mortgage balances, a 2.2 percent increase in credit card balances, and a 2.4 percent increase in auto balances. Mortgage balances in particular were boosted by a record $1.22 trillion in newly originated loans. Although some borrowers are originating new loans, struggling borrowers remain in forbearance programs, where they are pausing repayment on their debts and creating an additional upward pressure on outstanding mortgage balances.
Forbearance on debt repayment was a key provision of the CARES Act, legislation intended to combat the widespread economic losses stemming from the COVID-19 pandemic. This pause on required payments for federally guaranteed mortgages and student loans has provided temporary relief to those affected by the COVID-19 pandemic, and servicers of nonfederal loans often provided forbearances or other relief on request as well. Here, using a special survey section fielded with the August 2020 Survey of Consumer Expectations, we aim to understand who benefitted from these provisions. Specifically, were there differences by age, race, income, and educational background? Did individuals who suffered job or income losses benefit differentially? Did renters receive more or less nonhousing debt relief than homeowners? Answers to these questions are not only key for understanding the economic recovery and implications for inequality and equitable growth, they can provide important insight into the expected effects of more recent and potential future legislation.
Housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class. Yet there is limited understanding of how households view housing as an investment relative to financial assets, in part because of their differences beyond the usual risk and return trade-off. Housing offers households an accessible source of leverage and a commitment device for saving through an amortization schedule. For an owner-occupied residence, it also provides stability and hedges for rising housing costs. On the other hand, housing is much less liquid than financial assets and it also requires more time to manage. In this post, we use data from our just released SCE Housing Survey to answer several questions about how households view this choice: Do households view housing as a good investment choice in comparison to financial assets, such as stocks? Are there cross-sectional differences in preferences for housing as an investment? What are the factors households consider when making an investment choice between housing and financial assets?
Since the depths of the Great Recession, household debt has increased from a low of $11 trillion in 2013 to more than $14 trillion in 2020 (see the New York Fed Household Debt and Credit Report). In this post, we examine how consumers’ repayment priorities have evolved over that time. Specifically, we seek to answer the following question: When consumers repay some but not all of their loans, which types do they choose to keep paying and which do they fall behind on?
Today, the New York Fed’s Center for Microeconomic Data reported that household debt balances increased by $206 billion in the fourth quarter of 2020, marking a $414 billion increase since the end of 2019. But the COVID pandemic and ensuing recession have marked an end to the dynamics in household borrowing that have characterized the expansion since the Great Recession, which included robust growth in auto and student loans, while mortgage and credit card balances grew more slowly. As the pandemic took hold, these dynamics were altered. One shift in 2020 was a larger bump up in mortgage balances. Mortgage balances grew by $182 billion, the biggest uptick since 2006, boosted by historically high volumes of originations. Here, we take a close look at the composition of mortgage originations, which neared $1.2 trillion in the fourth quarter of 2020, the highest single-quarter volume seen since our series begins in 2000. The Quarterly Report on Household Debt and Credit and this analysis are based on the New York Fed’s Consumer Credit Panel, which is itself based on anonymized Equifax credit data.
The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing narrative ascribes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. This post, based on our recent working paper, “Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom,” presents evidence that is inconsistent with conventional wisdom. In particular, we show that the housing boom and the subprime boom occurred in different places.
Much of the concern about affordable homeownership has focused on first-time buyers. These buyers, who are often making the transition from renting to owning, can find it difficult to save to meet down-payment requirements; this is particularly true in those areas where rent takes up a significant portion of a household’s monthly income. In contrast to first-time buyers, repeat buyers can typically rely on the equity in their current house to help fund the down payment on a trade-up purchase; they also have an easier time qualifying for a new mortgage if they’ve successfully made payments on a prior mortgage, thereby improving their credit score. Despite the policy focus on first-time buyers, reliable data on these buyers do not exist. In this initial post in a three-part series, we introduce a better measure of first-time buyers and examine the dynamics of this group over the past seventeen years. In our next post, we will describe the characteristics of first-time buyers. We will conclude the series by examining the sustainability of homeownership for first-time buyers.