The jump in mortgage loans is fueling the home price boom in the United States

US Economy Updates

Americans increased their mortgage loans in the second quarter of the year, adding fuel to a housing boom that has seen prices in the United States rise at a record pace.

Data from the New York Federal Reserve showed that mortgage facilities reached $1.2 trillion in the three months to the end of June, exceeding volumes seen in the previous three quarters and well above the $752 billion level reached in the fourth quarter of 2019. Combined Mortgage assets over the four quarters through June 30 — which include refinancing — totaled nearly $4.6 trillion, a historic high.

That helped push mortgage balances above $10 trillion — after a $282 billion increase over the previous three months — meaning that 44 percent of the outstanding mortgage balance originated in the past year.

US home prices have approached new highs, buoyed by ultra-low mortgage rates that are now hovering around 3 per cent.

The S&P Corelogic Case-Shiller National Home Price Index jumped 16.6 percent in May from a year earlier, the biggest gain since at least 1988 and well above the previous record set in April, when prices rose 14.8 percent year on year. on a general basis.

Policymakers have been watching the rise in home prices closely, as the US central bank comes under scrutiny over its $40 billion in monthly purchases of mortgage-backed securities as part of its broader $120 billion bond-buying program.

President Jay Powell recently dismissed the idea that the Fed’s policies were disproportionately helping the housing market, stressing instead the central bank’s commitment to maintain the pace of its purchases until it achieves its goal of a more comprehensive recovery.

“[Asset purchases] It is not intended to directly support any industry, including the housing industry,” he said at a congressional hearing in July. However, low interest rates and asset purchases like that keep long-term interest rates low. They support lower mortgage rates, which he does [support] housing industry.

A 2.8 percent increase in mortgage balances in the second quarter, along with a 2.2 percent increase in credit card balances and a 2.4 percent increase in auto balances, raised total household debt by more than $300 billion by the end of June. ) to nearly $15 trillion. At 2.1 percent, the quarterly increase in total balances was the largest since the fourth quarter of 2013, resulting in the largest nominal increase since the second quarter of 2007.

Credit card balances grew by $17 billion, to offset the drop in student loan debt by $14 billion to $1.57 trillion.

“We have seen a very strong construction pace over the past four quarters with new credit extensions for mortgages and auto loans combined with a rebound in demand for credit card borrowing,” said Joel Scully, director of the Microeconomic Data Center in New York. feed it.

“However, there are still two million borrowers in the case of mortgage default and they are vulnerable to financial distress once the patience programs are over,” she added.

Forbearance policies put in place at the start of the pandemic helped keep delinquency rates low, according to New York Fed results. The share of outstanding debt that was at some point in default has fallen by two percentage points since the end of 2019, hovering around 2.7 percent.

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