The Level of Debt

Americans have developed an illusion of wealth by driving themselves into ever greater debt. No news here, but to see the numbers plainly is sort of shocking.

More Americans Deeper in Debt

U.S. households were saddled with a whopping $9.7 trillion in mortgage and consumer credit debt through the first half of the year, accounting for more than 80 percent of the nation's gross domestic product during that time, the Federal Reserve reports. According to Wells Fargo chief economist Sung Won Sohn, mortgages represent about 70 percent of current household debt. The level has risen to 21 times the debt level of U.S. households in 1970, but the increase in home values has advanced at an even more dramatic clip. With interest rates having declined to historically low levels in recent years, millions of Americans have used their homes as a cash resource by refinancing mortgages and taking out equity to pay for residential upgrades and general spending. Although home prices are not likely to fall nationwide, economists continue to express concern that a real estate bubble would result in a loss of wealth for millions of homeowners and reduce available household cash."