The US economy is showing some green shoots. Earlier we noted some data about falling credit card delinquencies. The WSJ piles on the good news: total household debt and bill delinquency is lower than any time since the start of the recession. More:
Total household debt, including mortgages, credit cards and auto loans, fell by $78 billion in the second quarter to $11.15 trillion, the lowest level since 2006, according to a report released Wednesday by the Federal Reserve Bank of New York.
The amount of bills 30 or more days late fell by $3.3 billion during the quarter, also reaching the lowest level in seven years.
The article traces this declining debt to the housing market. House values have gone up, allowing owners to profit from sales. Many Americans are also in a better position to pay down their mortgages.
I think Meade’s hat here is full of hooey. As usual.
A home foreclosed on is erased from consumer debt. It vanishes. Total foreclosures in the United States are lower than they have been, but higher than in the first quarter. Another fact to consider: A $200,000 mortgage vanishes as debt in foreclosure. And if the same house is repurchased with a $100,000 mortgage, that will result in a net decrease in consumer debt of $100K. This is not intentional deleveraging. This is price collapse.
There is a difference.