American mortgage debt is projected to surpass borrowing levels from 10 years ago. However, the National Association of Realtors Chief Economist Lawrence Yun says there is no cause for alarm, according to an article written for Forbes.
“According to the Federal Reserve, outstanding mortgage debt totaled $10.2 trillion in the second quarter of this year, an increase of 2.7% over the past year. During the easy subprime bubble lending days, the total debt hit $10.7 trillion.”
“In addition, consumers have been taking on increasingly higher non-mortgage debt, as they purchase new cars with borrowed money and pay college tuition with student loans. The growth in these non-mortgage debt areas has been rising at a faster pace of 4.6% from one year ago. In all, the total combined household debt stood at an all-time high of $15.7 trillion.”
The article states that instead of paying attention to the accumulating debt, Americans should be focused on assets. According to Yun, the combined net indicates a “strong household balance sheet.”
"The aggregate mortgage debt outstanding today is roughly the same today as a decade ago, at $10.3 trillion. Yet the aggregate valuation of homes rose from $18.6 trillion to the current $29 trillion. A new high in mortgage debt is not worrisome."
Yun wrote that mortgage debt is performing very well with low default rates. Notably, seriously delinquent mortgages are sitting at 2.1%. This is direct contrast to 2009, when high levels resulted in nearly 10% of mortgages being seriously delinquent.
Furthermore, it’s possible that distressed property home sales are at 3% of all transactions, which is a tremendous drop from 36% a decade ago, according to Yun.
But what about the total household debt? Well, Yun concludes by saying it’s become less of a concern.
The article explains it nearly doubled from $59 trillion in 2009 to $107 trillion in the second quarter of 2018. Even if the stock market plummeted 20%, Yun claims the America’s net worth is comparably higher today than it was a decade ago.