Rise in mortgage loans fuels US house price boom

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News about the US economy

Americans increased their mortgage loans in the second quarter of the year, fueling the housing boom that pushed US prices up at a record pace.

Data from the New York branch of the Federal Reserve showed that mortgage lending reached $ 1.2 trillion in the three months ended June, surpassing the previous three quarters and the level of $ 752 billion in the final quarter of 2019 clearly exceeded. Combined, mortgage loans for the four quarters ended June 30, including refinancing, were nearly $ 4.6 trillion, an all-time high.

This helped push mortgage balances to more than $ 10 trillion – up from $ 282 billion in the last three months – meaning about 44 percent of the outstanding mortgage balances accrued last year.

US house prices have hit new heights, boosted by extremely low mortgage rates, which are now around 3 percent.

The S&P Corelogic National Case-Shiller Home Price Index rose 16.6 percent year-over-year in May, the largest increase since at least 1988 and well above the previous April record when prices rose 14.8 percent year-over-year increased. Annual basis.

Policy makers have been watching the rise in home prices closely, with the Federal Reserve as part of its broader $ 120 billion bond purchase program.

Chairman Jay Powell recently dismissed the idea that Fed policies disproportionately support the housing market and instead reiterated the central bank’s pledge to maintain the pace of its purchases until it reaches its goal of a broader recovery.

“[Asset purchases] are not intended to directly support any industry, including housing, ”he said at a congressional hearing in July. “Still, low interest rates and such asset purchases keep longer-term interest rates low. They support low mortgage rates, which they do [support] the housing industry. “

The 2.8 percent increase in mortgage balances in the second quarter, coupled with credit card balances increasing 2.2 percent and auto balances increasing 2.4 percent, added more than $ 300 billion to total household debt through June nearly $ 15 trillion. The quarterly increase in aggregate balances of 2.1 percent was the strongest since the final quarter of 2013 and led to the strongest nominal increase since the second quarter of 2007.

Credit card balances rose $ 17 billion, reducing student loan debt by $ 14 billion to $ 1.57 billion.

“We have seen a very robust issuance pace over the past four quarters with new loan extensions for mortgages and auto loans combined with a recovery in demand for credit card loans,” said Joelle Scally, administrator of the Center for Microeconomic Data at New York Fed.

“However, there are still 2 million borrowers who are vulnerable to financial hardship after the deferral programs end,” she added.

According to the New York Fed’s findings, the leniency policies put in place at the beginning of the pandemic helped keep crime rates down. The share of outstanding debt that was at a certain stage of insolvency has fallen by 2 percentage points since the end of 2019 and is around 2.7 percent.


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