American households have almost $16 trillion of debt, but researchers say there’s a silver lining

U.S. household debt rose by $266 billion during the first quarter of 2022 to $15.84 trillion, according to the Quarterly Report on Household Debt and Credit released Tuesday by the Federal Reserve Bank of New York. 

While the quarterly increase is not quite as big as the jump seen in the last quarter of 2021, New York Fed researchers said the $266 billion was a “pretty sizable increase” given that balances are typically lower during the first quarter because of changes in seasonal spending and borrowing. In fact, it was the largest quarterly increase seen in the first quarter since 2006. 

The debt increase this quarter was primarily driven by a $250 billion increase in mortgage balances. Auto loan balances also increased by $11 billion.

Credit card balances declined some from the end of 2021—this tends to happen during the first quarter as Americans pay off their credit cards after the holiday shopping season comes to a close. Balances were about $71 billion higher year-over-year than in 2021, but still about $52 billion lower than where they were just before the COVID-19 pandemic started. 

“The first quarter of 2022 saw an increase in mortgage and auto loan balances coupled with a typical seasonal decrease in credit card balances,” Andrew Haughwout, director of household and public policy research division at the New York Fed said in a statement. 

But while overall mortgage and auto balances were up, the number of new loans declined slightly during the first three months of 2022 from the historic highs. New mortgages, or mortgage originations, totaled $859 billion for the quarter, down, but still above pre-pandemic levels. 

New auto loans hit $177 billion for the quarter. This continues the trend the New York Fed has seen in recent quarters where there’s a smaller number of auto loans being originated, but the average amount is much higher. This is due to the continued inflation in both new and used car prices, as well as higher interest rates.

“Mortgage originations declined from the historically high volumes seen in 2021, reflecting an unwinding in the demand for refinances,” Haughwout said.

But despite the overall higher debt load, U.S. household finances look pretty good, according to New York Fed researchers. Delinquencies are at historically low levels and bankruptcy rates are near historic lows. Additionally the new mortgages were “very high-quality”—more than 80% went to borrowers with credit scores over 720.

But this isn't the time to say everything is great, New York Fed researchers warned. There are some warning signs out there that consumer finances might be shaky going forward. The first quarter saw an uptick in early delinquency rates, particularly in auto loans taken out by borrowers who are under 40. There’s also been a small uptick in the number of new foreclosures that were enacted, the first time since the pandemic started. 

New York Fed researchers also noted that their data doesn’t provide good insight into what’s going on with renters and the impact of very sharp rent increases. But they predict that renters are going to experience some financial stress, especially as all the local and federal support programs like eviction moratoriums and rental assistance are unwinding. 

The overall picture as pretty good in terms of household debt, credit, and wealth. Of course, it doesn't mean that is true for the whole population, New York Fed researchers said.