US Debt Service

The economic times have really changed. The scope of household deleveraging is quite astounding. The Federal Reserve releases a figure called the Financial Service Ratio which measures amount of consumer and mortgage debt servicing including automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance, and property tax payments to disposable personal income. For renters, the ratio peaked around 2001 at 31.05. For homeowners, it peak a lot later around 2007 at 17.55. Both have been sliding ever since. This data refers to the country as a whole. The picture for the individual regions may look different.

Forbes had an article on credit card debt variations among US cities. The claim is that credit card debt is low in some high cost or high unemployment cities. At least in terms of high cost, one has to wonder whether that has to do with mortgage debt crowding out other debt. In any case, the total debt service ratios for even some of the highest cost areas have dropped considerably through the financial crisis. Now we are looking to the world governments as they go through this deleveraging cycle, a much, much more difficult proposition as it seems.

Source: Federal Reserve