Twice this year, American households appeared to pay down debt. Both times, the number was something else in costume.
The first came on May 12, when the New York Fed's quarterly household debt report showed credit card balances falling by $25 billion in the first quarter, to $1.25 trillion. A quarter of restraint, read one way. The Fed's own research economist, Daniel Mangrum, read it the other way in the same press release, describing "modest increases in most debt types offsetting a seasonal decline in credit card balances." In the 23 first quarters the Fed's series allows the comparison, card balances fell in 22 and held flat in the other, because December happens every fourth quarter. By the second quarter they had risen $21 billion, to $1.26 trillion, and they stand $54 billion higher than a year ago. Nothing was paid down. The calendar turned.
The second arrived on August 11: mortgage balances down $74 billion in a single quarter, which would be a remarkable act of collective discipline at these rates. The report itself takes the trouble to unremark it. The decline "was mostly due to a servicer transfer gap in the reporting of mortgages and otherwise it would have stayed flat." Not a paydown. A paperwork seam between loan servicers.
The framing that reached me read the spring numbers as a swap: households trading the debt they feel guilty about, the card, for the debt they feel fine about, the house. It rested on a credit bureau's news page that has since rolled over to back-to-school budgeting tips, so I recovered the June edition from a web archive, and the page turns out to be more careful than the framing built on it. "The drop follows a seasonal pattern," it noted, "as consumers often pay down holiday spending early in the year." The swap was a reading laid on top. The Fed's tables tell the story underneath. Nobody swapped anything. Cards did what they do every winter, mortgages did paperwork, and total household debt sits at $18.8 trillion, up $4.6 trillion since the end of 2019.
One line in the report, though, does not care what quarter it is. Home equity lines of credit (HELOCs) rose $13 billion in the second quarter, to $459 billion, which the report notes is the 17th consecutive quarterly increase. Every quarter since early 2022, without a pause. The Fed puts the current total at $142 billion above the low reached in the first quarter of 2022, which puts that low near $317 billion and the climb since at roughly 45 percent. The banks are not merely tolerating this; HELOC limits rose another $19 billion in the quarter, an expansion the Fed dates to 2022.
What the money buys, the tables do not say, and I will not pretend they do. A renovation, a tuition bill, or the card balance moved somewhere cheaper and politer: all invisible in aggregate. The report is a snapshot of what is owed, not a film of why. Nor is this distress, yet. "Delinquency rates across most products have held steady over the past two years," the New York Fed's Joelle Scally said with the August release. The share of HELOC balances newly going 90 days late was 1.15 percent, flat on the year; cards run near 7. Overall, 4.7 percent of outstanding debt is in some stage of delinquency, down a tenth of a point.
Here is the unresolved part. A credit card is unsecured; it is a claim on your future restraint. A home equity line is secured on a price. Inflation was still 3.4 percent in the year to July by the Bureau of Labor Statistics count, and yesterday I wrote about how unevenly American housing is repricing beneath one national mortgage rate; in the realtor.com series I cited there, Austin's asking prices have fallen every July since 2022, while sale prices elsewhere still climb, by other counts. Seventeen straight quarters of borrowing against the house is seventeen straight quarters of betting the price holds. The Fed's table updates every three months. The collateral reprices whenever the house next door sells.
