December 6, 2012
Fed Data: Are We Richer Than We Thought? (Matthew Zeitlin, Dec 6, 2012, Daily Beast)
Posted by Orrin Judd at December 6, 2012 4:55 PMIn the third quarter, according to the Fed's latest "Flow of Funds" report, debt held by households fell 2 percent at an annual rate, and home mortgage debt declined three percent, continuing a trend that started in 2008. Consumer credit, on the other hand, rose for the eighth straight quarter, this time at an annual rate of 4.5 percent. All told, households have $12.9 trillion debt, non-bank businesses has $12.1 trillion and state, local and federal government has $14.3 trillion in debt. The hidden riches, such as they are, came in household net worth, which is household assets minus their debts. It stood at $64.8 trillion, a $1.7 trillion increase, from the second quarter. Of that increase, $800 billion came from rising stock and mutual fund values, and $370 billion came from higher real estate prices.This time around, however, the rise in housing isn't being accompanied by a rise in mortgage debt. That's because many underwater homeowners are not able to sell their homes or refinance. Instead, they are patiently making their mortgage payments and getting closer to positive equity in their homes. Meanwhile, mortgage modifications and foreclosures continue to lop off mortgage debt. At the same time, home values are rising across the board, and are rising especially sharply in some of the areas most affected by the housing crash. Finally, a huge portion of new mortgages are actually refinancings. For example, at Wells Fargo, the biggest mortgage servicer in the country, 72 percent of mortgages in the third quarter were refinancings. Also, the government's program to assist distressed homeowners whose homes are worth less than the outstanding mortgage, HARP, have exploded. The program has completed 709,000 refinances through September; the program has done 1.7 million total since its inception in April, 2009. Of those completed this year, 142,000 have been for homeowners whose mortgage is worth 25 percent more than the value of their home.