Americans Simply DGAF; 2021 Household Debt Up $1T

Auto loan originations and mortgages made up the bulk majority of U.S. household debt in Q4 2021, and the year as a whole. Total household debt increased $333 Billion in the 4th quarter of 2021, bring the total increase to $1 Trillion in the year 2021, according to the Quarterly Report on Household Debt and Credit. In nominal terms, this is the largest increase seen since…2007. Yikes. In the fourth quarter, mortgage balances rose $258 Billion, and auto loan originations grew $181 Billion. Consumers took advantage of record low rates to secure advances on cars and homes.

Contrary to popular belief, credit card balances remain $7.1 Billion lower than at the end of 2019. This metric is likely reflected in a December slump in PCE which Wall Skreet analysts pointed out.

An increase in mortgage and auto loan originations likely means Americans have less expendable cash to spend, as they’ll be paying down loan installments instead. Americans racked up savings amidst the pandemic, and some took advantage of absolutely nuclear returns in the equities market. That, coupled with record low real interest rates sent a frenzy of home buying and splurging which sent the total U.S. household debt to a total of $15.58 Trillion at the end of 2021.

Where do we go from here? Since the Wall Skreet Summer Twenty Fun is of no more, unfortunately also is the most insane and euphoric bull market and spending free ever. It truly was a beautiful thing. With a looming potential 175 bps rate hike from and QE infinity officially ending, household debt will likely level off or potentially start to come down. Although, as long as inflation remains nuclear for the foreseeable future, that may not be the case. Only time will tell.