US household liabilities

This page is about the liabilities (total and some key sub-components) of the household sector (including nonprofits). The main interest is in characterizing the medium term trend and its sustainability.

Note: this page may not be updated every quarter.


8 Apr 2013.

Household debt as a percentage of disposable income peaked at 130% in Q3 of 2007, and has now dropped to 106%. This is back to about the level of 2003, undoing the unhealthy rise in the boom years. For now, at least, it appears that the household sector is restoring some much-needed resilience.

It is unclear how much debt is too much. Probably the most important effect of high debt is that economic shock – e.g. ARM resets or rising unemployment – is magnified, both for individuals and for consumer spending. In this regard it is important to note that during the boom credit growth was strongest among lower-income bands; from 1989 to 2004, for the first four income quintiles and the top two deciles, the increase in debt per family was 261%, 170%, 131%, 90%, 103%, 93%.

The fraction of household income that is devoted to fixed financial obligations – debt service, rent/lease payments, property tax and insurance – is unusually low right now. This indicates relatively high resilience in the household sector, at least until interest rates rise.


8 Apr 2013. Data through Q4 2012.

Debt levels are from the Flow of Funds (table B.100 or, equivalently, L.100). Total liabilities and home mortgages are for the household sector, as defined by the Federal Reserve, including nonprofit organizations. Consumer credit in B.100, on the other hand, is carried over from the G.19 report, and covers only loans to individuals. All debt levels are normalized by Disposable Personal Income from NIPA table 2.1.

Data are from the Federal Reserve.


Fed G.19 consumer credit background (9 Jun 2011) The monthly Federal Reserve Statistical Release G.19, “Consumer Credit”, is the primary source for aggregate outstanding consumer credit not tied to real-estate. It is divided into revolving (mostly personal credit card) and non-revolving (e.g. auto, school loans).

Over the long term, consumer credit has grown greatly. For example, revolving credit grew at a 17% annualized rate (CAGR), from 1968 to 2009. No doubt credit is more pervasive now, but in part this merely reflects a new medium of exchange rather than an increase in indebtedness – the monthly G.19 includes all oustanding balances, and a large percentage of those are paid off every month.

The G.19 comes out about 5 weeks after the end of the month reported. Although many people try to guess spending trends based on consumer credit, in fact spending data come out on about the same schedule, making such analysis largely redundant.

Fed survey of consumer finances (10 Jun 2011) The Federal Reserve Survey of Consumer Finances (SCF), normally occurring every three years, gathers data on income, saving, net worth, financial and nonfinancial assets, debt, debt payments, high debt burden (over 40% of income) and delinquency, all broken down by percentile ranking in income, age of head of household (HOH), education of HOH, race of respondent, work status of HOH, region, owner/renter, and percentile ranking of net worth.

E.g. From 1989 to 2004, for the first four income quintiles and the top two deciles, the increase in debt per family was 261%, 170%, 131%, 90%, 103%, 93%. So during the boom the poorest families increased their debt, proportionally, the most.

A 2000 study compared Flow of Funds Accounts (FFA) with results from the 1989, 1992, 1995, and 1998 SCF, after making a number of adjustments for definitional differences; the difference in FFA and SCF estimates of total liabilities varied from 0.4% to 10.4% over the four different sample years; for assets 0.9% to 9.3%.

Financial Obligations Ratio (11 Jun 2011) The Federal Reserve publishes quarterly the so-called “financial obligations ratio”, which estimates that fraction of household disposable income that goes to fixed payments, including

  • required payments on mortgage and consumer debt
  • rent payments
  • automobile lease payments
  • homeowners' insurance and property tax

Flow of funds household balance sheet background (9 Jun 2011) The Flow of Funds report from the Federal Reserve provides, in tables B.100 and L.100, the only serious, public, regularly revised estimate of the household sector balance sheet. Derivation of the numbers is complex and involves some guesswork, so all results should be taken with a grain of salt. However the trends are most likely correct.

Normalization (10 Feb 2009) Liabilities are usually normalized either by Disposable Personal Income (DPI) or by Gross Domestic Product (GDP). The share of GDP claimed by DPI changes over time, so they are not equivalent. When the focus is on the state of household finances, DPI is more appropriate, as it the debt is serviced from DPI (DPI, like household liabilities, covers both individuals and nonprofits; see National income and product accounts background). When the focus is on sectoral shares of overall debt in the country, normalization by GDP makes more sense, putting all sectors on the same scale.

Sensitivity of household sector to economic shocks (9 Feb 2009) The BIS makes the point that higher debt increases the sensitivity of the household sector to increases in either unemployment or interest rates. The US is not alone in having greatly increased household debt in recent decades – see graphs in Mar 2004 entry.


See also

Selected commentary:

Clippings below were used in the construction of this page

Definitions for the numbers from the Flow of Funds

Jan 2000. Guide to the Flow of Funds.

[Notes to the table F.100, on pp170ff.]

”[Line] 39. Net increase in liabilities of the households and nonprofit organizations sector … [Line] 41. Change in home mortgage debt of the households and nonprofit organizations sector … [Line] 42. Change in consumer credit liabilities of households. … Level from FR Board, Financial Institutions Section, monthly G.19 statistical release.”

BIS on increased sensitivity of households to interest rates and unemployment

Mar 2004. Special feature in BIS Quarterly Review.

“Household debt and the macroeconomy. Guy Debelle”

“Much of the increase in household borrowing can be attributed to two factors: the decrease in the prevalence of credit rationing that followed from the financial deregulation of the early 1980s; and the reduction in interest rates, both in real and nominal terms, as inflation declined over the past two decades. … Regardless of whether the increase in household debt is sustainable … The household sector will be more sensitive to movements in interest rates, particularly if they are unexpected, and to changes in income, most notably arising from unemployment. …

In every country, the bulk of the increase in household debt has been in the form of borrowing for housing. For example, such borrowing currently accounts for around 75% of total household debt in the United States and the United Kingdom and around 60% in France and Germany, while in Australia it accounts for 85%. Although growth in borrowing for other purposes, particularly in the form of credit card debt, has also exceeded that of income over this period, it comprises a markedly smaller share of total household debt. …

The leverage of households can be calculated by scaling household debt by the value of household assets. The interest cover can be measured by dividing household loan repayments (which include both interest payments and required principal repayments) by a measure of household disposable income. … Graph 2 shows that leverage ratios have generally risen by no more than 5 percentage points; in the case of France, the ratio has actually decreased. In large part, this reflects the concomitant increase in house prices that has occurred in most countries, although in some instances it also reflects an increase in the value of equity wealth. Were house prices to fall, this measure of household gearing would deteriorate rapidly, as the value of household assets declined but the associated debt did not. Hence care must be taken in using this measure to assess the sustainability of household debt. The interest cover of households does not show a clear upward trend in most countries. The effect of the increase in household indebtedness has been offset by the decline in borrowing rates so that, on average, households are not devoting any greater share of their income to debt service than in the past. However, in some countries, debt service is already close to historical highs, and would rise further were mortgage rates to increase. …

Housing equity withdrawal has boosted both consumption and residential investment in those countries where it has been prevalent. In Australia, it is estimated to have increased household disposable income and thereby consumption growth by around 1 percentage point in each of the past four years (Reserve Bank of Australia (2003a)), while in the United Kingdom and the United States, equity withdrawal boosted household incomes by over 2% in 2000 (Davey (2001) and Deep and Domanski (2002)). In the opposite direction, the reversal of this process is estimated to have reduced growth in household consumption in the Netherlands by around 0.5 percentage points in 2001 and 2002 respectively, having raised it by 1 percentage point in 2000 (Netherlands Bank (2003)). …

Increased household indebtedness, in and of itself, is not likely to be the source of a negative shock to the economy. Rather the primary macroeconomic implication will be to amplify shocks to the economy coming from other sources, particularly those that affect household incomes, most notably rises in unemployment.”

Definition of Financial Obligations Ratio

14 Mar 2011. Federal Reserve FOR home page.

“Household Debt Service and Financial Obligations Ratios”

“The household debt service ratio (DSR) is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.

The financial obligations ratio (FOR) adds automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance, and property tax payments to the debt service ratio.

Homeowner and renter FORs are calculated by applying homeowner and renter shares of payments and income derived from the Survey of Consumer Finances and Current Population Survey to the numerator and denominator of the FOR.

The homeowner mortgage FOR includes payments on mortgage debt, homeowners' insurance, and property taxes, while the homeowner consumer FOR includes payments on consumer debt and automobile leases.”