Household Debt

WEESP, Netherlands - The Dutch dream isn't that different from the American one. Nor is the nightmare that many people have woken up to. Hundreds of thousands of residents rushed to buy homes in the Netherlands as property values rocketed in the 1990s and 2000s. Encouraged by American-style tax breaks and by banks eager to shower money on them, borrowers took out huge mortgages, sometimes larger than the value of their homes. The global financial meltdown killed the flow of cheap credit.

WEESP, Netherlands - The Dutch dream isn't that different from the American one. Nor is the nightmare that many people have woken up to. Hundreds of thousands of residents rushed to buy homes in the Netherlands as property values rocketed in the 1990s and 2000s. Encouraged by American-style tax breaks and by banks eager to shower money on them, borrowers took out huge mortgages, sometimes larger than the value of their homes. The global financial meltdown killed the flow of cheap credit.

What happens when, in boom times, households run up substantial debt through mortgages, personal loans and credit cards? When the economy starts to slump, the recession is deeper and the eventual recovery is much weaker, according to the International Monetary Fund. In its new World Economic Outlook report , the IMF found that declines in economic activity aren't only caused by falling home prices and the resulting crunch on household wealth. Prerecession indebtedness often makes contractions “more severe and protracted.” In the five years before 2007, the ratio of household debt to income in advanced economies rose an average 39 percentage points a year to 138%.

WASHINGTON -- American families reduced their debt load in the first three months of the year by 1%, bringing it down to pre-recession levels after an uptick in the last quarter of 2012, the Federal Reserve said Tuesday. Outstanding household debt, including mortgages, credit cards and auto and student loans, dropped to $11.23 trillion in the first quarter of the year. That was down $110 billion from the final three months of 2012 and well below the peak of $12.68 trillion reached in the fall of 2008, the Fed said.

The debts of American households shrank for a seventh straight quarter, the Federal Reserve said Tuesday in a new report documenting how the easy-money boom has given way to a powerful contraction in borrowing. Total household debt has tumbled 6.5% from its peak in 2008, reflecting a retrenchment that has been both voluntary and involuntary. Credit card balances, for example, have declined in the last two years, but lenders slashed card limits even more sharply. Although the decline in indebtedness has improved Americans' personal balance sheets overall, it also has contributed to weak consumer spending, putting a drag on the economic recovery.

The American consumer's long-running love affair with debt appears to be on the rocks. But like a lot of soured romances, the reasons are open to debate. What's known is that the debt held by U.S. households shrank in the three months ended Sept. 30. That's the first time that has happened since the government began keeping records more than 50 years ago, the Federal Reserve said Thursday.

WASHINGTON -- American families reduced their debt load in the first three months of the year by 1%, bringing it down to pre-recession levels after an uptick in the last quarter of 2012, the Federal Reserve said Tuesday. Outstanding household debt, including mortgages, credit cards and auto and student loans, dropped to $11.23 trillion in the first quarter of the year. That was down $110 billion from the final three months of 2012 and well below the peak of $12.68 trillion reached in the fall of 2008, the Fed said.

The net wealth of American households rose in the third quarter of 2005 as real estate and financial assets gained value, but household debt grew at the fastest rate since 1987, the Federal Reserve said Thursday. In its quarterly Flow of Funds report, the central bank said household balance-sheet values rose to $51.09 trillion in the quarter, up from a revised $49.77 trillion in the second quarter. The second-quarter net worth was originally reported at $49.83 trillion.

Americans saw their wealth increase by $1.7 trillion in the third quarter ended in September, a promising sign in the thick of the holiday shopping season. Total household and nonprofit net worth - the difference between the value of assets and liabilities - climbed 2.7% to nearly $64.8 trillion from $63 trillion the previous quarter. A year ago, the gauge was at $58.7 trillion, according to a report Thursday from the Federal Reserve. Households enjoyed a $301 billion bump in the value of their real estate holdings; the value of stock investments increased as well.

Growth in non-financial debt slowed during the first quarter, reflecting smaller gains in borrowing by consumers, companies and governments, the Federal Reserve said. Non-financial debt, which excludes borrowing by banks, rose at a 6.5% annual rate during the quarter, the slowest in a year. In the fourth quarter, non-financial debt increased at an 8% pace. Household debt rose at a 10% pace in the first quarter after expanding at a 10.9% pace in the fourth quarter.

The student-loan market is not in a bubble and going into debt to pay for college is still worth it, according to a new report. But those are the rare bits of good news in the otherwise dispiriting report on students' escalating college debt. While concluding that diplomas are worth the money, the study by Wells Fargo economists found that the payoff may not come for years because graduates are squeezed by several factors. Tuition costs are rising faster than incomes. Graduates are having trouble finding solid jobs.

Americans saw their wealth increase by $1.7 trillion in the third quarter ended in September, a promising sign in the thick of the holiday shopping season. Total household and nonprofit net worth - the difference between the value of assets and liabilities - climbed 2.7% to nearly $64.8 trillion from $63 trillion the previous quarter. A year ago, the gauge was at $58.7 trillion, according to a report Thursday from the Federal Reserve. Households enjoyed a $301 billion bump in the value of their real estate holdings; the value of stock investments increased as well.

WASHINGTON - After a long period of consumer retrenchment, U.S. families have cut their once-out-of-control debt loads down to pre-recession levels, largely removing one major obstacle to a faster economic recovery. The amount of home mortgages, credit card debt and most other consumer liabilities now stands on par with 2006 or earlier, according to calculations by Moody's Analytics. The notable exception is student loans, which have skyrocketed in recent years, with people flooding into schools and college costs soaring.

What happens when, in boom times, households run up substantial debt through mortgages, personal loans and credit cards? When the economy starts to slump, the recession is deeper and the eventual recovery is much weaker, according to the International Monetary Fund. In its new World Economic Outlook report , the IMF found that declines in economic activity aren't only caused by falling home prices and the resulting crunch on household wealth. Prerecession indebtedness often makes contractions “more severe and protracted.” In the five years before 2007, the ratio of household debt to income in advanced economies rose an average 39 percentage points a year to 138%.

CHICAGO — Treasury Secretary Timothy F. Geithner said that improvement in the economy is promising, but he warned that too much deficit cutting too quickly could undermine the recovery. Speaking in Chicago, Geithner noted Wednesday that business investment in equipment and software is up 33% and exports have grown 24% in the last 21/2 years. "Overall, we have done a better job than many economies in making adjustments" after the financial crisis, he said. Geithner also commended Eurozone leaders for the safeguards they have put in place to curtail the threat of a new financial crisis.

For there to be stability in Europe and around the world, the U.S. needs to get its act together, said Christine Lagarde, managing director of the International Monetary Fund in a speech Tuesday. “The world is growing smaller and more interconnected by the day, meaning that economic disruption in one country can touch people all across the globe,” Lagarde told journalists at the Associated Press Annual Meeting inWashington, D.C. The U.S., she said, holds $2.5 trillion in foreign assets while banks abroad have $5.5 trillion in U.S. assets.

The student-loan market is not in a bubble and going into debt to pay for college is still worth it, according to a new report. But those are the rare bits of good news in the otherwise dispiriting report on students' escalating college debt. While concluding that diplomas are worth the money, the study by Wells Fargo economists found that the payoff may not come for years because graduates are squeezed by several factors. Tuition costs are rising faster than incomes. Graduates are having trouble finding solid jobs.

The rising stock market is making Americans richer. A powerful surge in stock prices that began in early October helped boost Americans' net worth 2.1% in the fourth quarter, according to data released Thursday by the Federal Reserve. Investor stock portfolios jumped nearly 10% in the final three months of the year, as the Standard & Poor's 500 index rose 11%. Overall net worth rose to $58.5 trillion, up nearly 20% from the early-2009 low that followed the global financial crisis.

The rising stock market is making Americans richer. A powerful surge in stock prices that began in early October helped boost Americans' net worth 2.1% in the fourth quarter, according to data released Thursday by the Federal Reserve. Investor stock portfolios jumped nearly 10% in the final three months of the year, as the Standard & Poor's 500 index rose 11%. Overall net worth rose to $58.5 trillion, up nearly 20% from the early-2009 low that followed the global financial crisis.

Here's your tears-on-my-pillow Tuesday roundup of consumer news from around the Web: --We're managing our money better. The consulting firm McKinsey says that since 2008, all types of U.S. private-sector debt -- such as mortgage, credit card and corporate loans -- have fallen as a percentage of the broader economy. Household debt in the U.S. has fallen a total of $584 billion over the last four years, a 15% decline relative to people's overall disposable income. Debt carried by businesses has also declined.