Here’s the hyper-financialization of mortgages in pictures. In just three years mortgage debt has soared despite plunging home sales.

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Image from Fed DFA Report: Distributional Financial Accounts, square inserts by Mish

Hyper-Financialization of Mortgages Key Points

• In 2000 Q1 total mortgage debt was $4.50 trillion. The top 1 percent had only $0.20 trillion. The top 10 percent had $0.88 trillion. The 50-90 percentile had $2.17 trillion in debt, and the bottom 50 percent had $1.23 trillion in mortgages.
• In 2008 Q1 total mortgage debt soared to was $10.70 trillion. The top 1 percent had only $0.38 trillion. The top 10 percent jumped from $0.88 trillion to 2.25 trillion. The 50-90 percentile more than doubled from $2.17 trillion in debt to $4.6 trillion. The bottom 50 percent total jumped from 1.23 trillion to $3.52 trillion.
• Consumers deleveraged between 2008 Q1 to 2015 Q1 as mortgage debt fell from $10.70 trillion to $9.35 trillion. Mortgage debt in the bottom 50% fell from $3.52 trillion to $2.48 trillion accounting for most of the decline. The decline is a combination of walking away from mortgages, bankruptcies, and slow paydown of mortgage debt.
• There is very little change between 2008 Q1 and 2020 Q1 as the slight deleveraging from 2008 Q1 to 2015 Q1 morphed into slight leveraging between 2015 Q1 and 2020 Q1. However, the mortgage debt in the bottom 50 percent fell again to $2.33 trillion.

Home Mortgages by Wealth Percentile 2020-2024

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Hyper-Financialization of Mortgages 2020-2024 Details

• Starting 2021 Q1 there was an 18.9 percent surge in mortgage debt from $10.99 trillion to $13.07 trillion, a jump of 2.08 trillion.
• None of surge was by the top 1 percent which nearly always pays cash. Mortgage debt actually decreased slightly in this period from $0.45 trillion to $0.39 trillion.
• The 50-90 percentile lead the charge with $1.00 trillion in mortgage debt. The 90-99 percentile added $0.51 trillion while the bottom fifty percent added $0.62 trillion.

Existing Home Sales Drop 5.4 Percent But Median Price Hits New Record

On July 23, 2024, I noted Existing Home Sales Drop 5.4 Percent But Median Price Hits New Record

Sales are down 38.6 percent from the January 2022 high. All-cash sales accounted for 28% of transactions in June, unchanged from May and up from 26% one year ago.

Sales have crashed and all-cash sales are over a quarter of the sales, yet mortgage debt has risen a whopping 18.9 percent in just three years.

A $150,000 House in 1988 Now Costs $707,500

To understand the surge in mortgage debt, please note A $150,000 House in 1988 Now Costs $707,500 Thank You Fed

The Fed has grossly distorted the housing market and no fix is in sight.

Credit Card and Auto Loan Delinquencies Surge in the Second Quarter

Yesterday, I noted Credit Card and Auto Loan Delinquencies Surge in the Second Quarter

Over ten percent of credit card outstanding debt is over 90 days delinquent. Banks will be curtailing credit.

A very painful period of deleveraging is about to begin.

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