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Recent developments in household liabilities

New insights from the Research Division

The FRED Blog has discussed research on personal finance topics such as credit card debt, credit scores, and wealth accumulation. Our question today is: What has driven the changes in household debt since the 1990s?

The FRED graph above shows data from the Board of Governors of the Federal Reserve System’s Z.1 Financial Accounts of the United States release about the balance sheets of households and nonprofit organizations. Each stacked bar represents the sum of five categories of loans:

  • Home mortgages (the blue segments)
  • Consumer credit (the red segments)
  • Depository institution loans not elsewhere classified (N.E.C.) (the green segments)
  • Other loans and advances (the purple segments)
  • Commercial loans (the teal segments)

The value of each type of liability has been divided by disposable personal income to represent its relative size.

There has been noticeable waxing and waning of these liability-to-income ratios, and recent research from Yu-Ting Chiang and Mick Dueholm at the St. Louis Fed explores how these ratios have changed. In the period they study, 1995-2019, mortgages were the single largest household and nonprofit organization liability; and, during the peak years of 2004-2010, all five types of loans amounted to between 120% and 134% of personal disposable income.

Chiang and Dueholm find that increases in the supply of loanable funds between 1995 and 2010 drove the liability-to-income ratios up and those ratios decreased between 2010 and 2019 when the demand for loans decreased.

For more about this and other research, visit the website of the Research Division of the Federal Reserve Bank of St. Louis, which offers an array of economic analysis and expertise provided by our staff.

How this graph was created: Search the alphabetical list of FRED releases for “Z.1 Financial Accounts of the United States” and select “Table B.101. Balance Sheet of Households and Nonprofit Organizations.” Select the data series “Home mortgages,” “Consumer credit,” “Depository institution loans N.E.C.,” “Other loans and advances,” and “Commercial mortgages.” Customize the data in each of the five graph lines by searching for “Households and Nonprofit Organizations; Disposable Personal Income, Transactions,” adding the series, and applying the formula a/b. Last, use the “Format” tab to change the graph type to “Bar” and the stacking option to “Normal.”

Suggested by Diego Mendez-Carbajo.

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