Disclosure:

  • This is my research shared with you.
  • Please verify everything before you use it for you.
  • Compiled and analyzed by Jeff Tumbarello.
  • The debt metrics are from the Federal Reserve website.

Economic News tends to be three things:

  • Someone’s brochure passed off as stats
  • Actual stats
  • Stats that are driven by an agenda/confirmation bias

The Wall Street Journal ran this article and some local higher profile Real Estate personalities in SWFL mentioned this. They say the devil is in the details. Once you dig deeper into the data that is available, it tells a different story than the headline from the Wall Street Journal.


 

 

Mortgage Debt Levels Have Surpassed the 2008 Levels: Let’s look at Mortgage Debt Levels in the Country.

Mortgage Debt outstanding Mortgage Debt Levels Has Surpassed The 2008 Levels

Mortgage Debt Levels Have Surpassed the 2008 Levels: Let’s examine 1 to 4 family debt levels.

If consumers were driving the rise in debt from the equity in their homes, this dataset would have grown past the 2008 levels. It has not.


Mortgage debt 1 to 4 family types Mortgage Debt Levels Has Surpassed The 2008 Levels

 

Mortgage Debt Levels Have Surpassed the 2008 Levels: Let’s look at the M1 money supply.

The money supply growth in the same time frame is defiantly worth seeing and understanding. Would the same level of debt matter with the multiples of Money increasing by 400 percent? I think having the ration of mortgage debt to M1 from 2008 will be a nice benchmark to watch if you are trying to see the next crash of 2008 proportions.

M1 Money Supply Mortgage Debt Levels Has Surpassed The 2008 Levels

Mortgage Debt Levels Have Surpassed the 2008 Levels: Total consumer debt.

This has clearly grown since the last crash and also in relation to the growth of the M1 money supply.

Total Comsumer credit outstanding Mortgage Debt Levels Has Surpassed The 2008 Levels

Mortgage Debt Levels Have Surpassed the 2008 Levels: Student loans.

The growth of this debt level is well-published in the media and has become a political issue as well.

Student loan debt outstanding Mortgage Debt Levels Has Surpassed The 2008 Levels

Mortgage Debt Levels Have Surpassed the 2008 Levels: Motor vehicle loans.

This is another level of debt that has eclipsed the peaks of the last cycle.

Motor vehicle loans outstanding Mortgage Debt Levels Has Surpassed The 2008 Levels

 

 

Mortgage Debt Levels Have Surpassed The 2008 Levels: All Commercial and Industrial Loans.

Here we find the culprit of the mortgage loan growth. Most of this loan growth is in larger commercial assets. This amount of debt growth coupled with the very low cap rates inherent in today’s low yield market causes this to be an asset class to watch when we have the next rescission. The 1987 S&L crisis comes to mind.

Commercial and industrial loan types outstanding Mortgage Debt Levels Has Surpassed The 2008 Levels

 

Some parting thoughts:

  • Debt levels for Mortgages have eclipsed the 2008 levels if you include all types of mortgages.
  • 1 to 4 family debt has still not eclipsed the last cycle. The likelihood of another 2007 type crash for that asset does not appear likely. This is a direct result of Dodd-Frank.
  • The primary debt growth for Real Estate mortgages is for commercial and multifamily. Expect the next correction to resemble the S& L crisis not 2007. Unless the metrics change and add the 1 to 4 family asset class into the same level of unsustainable debt.

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The Southwest Florida Real Estate Investment Association is the leading source of SWFL real estate investing events that provide investment education and networking in southwest Florida. We analyze the housing market and foreclosures and provide information, education and networking events in order to build a network and knowledge base for investors and potential investors. Our members include real estate agent, brokers, investors, hedge fund managers, rehabbers, wholesalers and more.

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