Americans Are Richer and Behaving Responsibly for Once
They
owe less on their mortgages, and their bank accounts are flush with cash
by Ben Steverman
2:01 PM CDT
March 12, 2015
Bloomberg.com
In the last year, unemployment dropped, stocks reached record highs,
and gas prices plunged. Americans got richer, so what did we do to
celebrate? We paid down our mortgages.
As the net worth of U.S. households rose 5.2 percent last year, to
$82.9 trillion, new Federal Reserve data show the
value of outstanding mortgages fell slightly in the same period. Homeowners now
own 54.5 percent of their real estate, up from less than 40 percent three
years earlier. Meanwhile, most other kinds of debt are up only slightly.
The Fed’s measure of consumer credit rose $218.4 billion last year, to $3.3
trillion. The strongest growth in debt is confined to two areas—student loans
and auto loans—which accounted for more than 80 percent of the rise.
Americans also saved, adding 6 percent more cash to bank and
money-market funds last year, Fed data show. Stock and mutual fund assets also
rose along with the bull market.
Homebuilders and retailers, of course, would prefer consumers start spending
that money on new homes and better wardrobes, either of which would
accelerate the economic recovery. The rate of homeownership is at a
20-year low, according to data from Bank of America. It’s even worse for young
people: The rate for those in their early 30s has dropped to 47.1 percent
from 57.4 percent since 2004. “The mortgage market is functioning almost as if
Lehman Brothers just collapsed,” says Michael Englund of Action Economics.
If banks started lending more freely, or millennials started house-hunting,
the economy would get a big boost. Then again, consumers’ sobriety is also a
sign that the U.S. economy may have years more to expand before the risk of a
recession, says OppenheimerFunds economist Jerry Webman. “We’re not getting to
the point of excess.”
