How much consumer debt is too much?
Today’s infographic uses extensive data from Equifax to try and answer this question.
We put consumer debt in a historical context, while providing an in-depth look at the latest numbers on different categories of debt such as student loans, credit cards, and mortgages to see how they compare.
In the United States, there are three broad types of debt in the spectrum: government, corporate, and consumer debt.
Government debt consists of federal, state, and municipal debt, and adds to a total of 136% of GDP. Meanwhile, corporate and consumer debt, which together constitute private debt, amount to 197% of GDP.
The History of Consumer Debt
Before diving into the numbers, there are two historical developments worth mentioning that have greatly influenced consumer debt.
The first is the rise of consumer credit through the 20th century.
If you go back to the 1800s, it was a different place:
- Information moved as fast as a boat.
- 90% of Americans lived in rural areas.
- 75% of Americans were involved with agricultural production.
- There was a stigma around borrowing to buy luxury items, and some saw it as immoral.
- Credit was only used in essential cases, such as borrowing money to buy seeds for farming.
- Credit history was oral and based on personal reputation.
Today is vastly different. Information travels instantaneously, the economy is diversified, computers are everywhere, and factories pump out cheap goods that people want to buy. Credit history is universal, and 72% of Americans have at least one credit card.
For more information about the development of credit in the 20th century, check out this motion graphic video on the history of credit cards.
The second factor that greatly influenced today’s consumer debt situation was government intervention in the mortgage markets between 1949 and 2000.
Agencies such as the Federal Housing Administration (FHA), Ginnie Mae, Fannie Mae, and Freddie Mac were active with the following objectives:
- Insuring mortgages
- Providing liquidity to the mortgage finance system
- Stabilizing the mortgage market
- Expanding the secondary market for mortgages
Between 1949 and 2000, home ownership increased from 54% to 64.7%.
However, that coincided with increases in debt-to-income ratios (20% to 73%) and mortgage debt to household assets (15% to 41%).
The Composition of Consumer Debt
According to Equifax, U.S. consumer debt is at $12.44 trillion. Here’s how it breaks down:
|Student Loans||$1.27 trillion||10.2%|
|Auto Loans||$1.14 trillion||9.2%|
|Credit Card||$0.74 trillion||6.0%|
|Total Consumer Debt||$12.44 trillion||100.0%|
Consumer Debt Trends
1. Mortgage Debt
Mortgage debt, by far the largest category of consumer debt, peaked during the 2008 Financial Crisis at close to $10 trillion. Today, however, it makes up 72% of total consumer debt at $8.96 trillion.
This debt has been partially fueled by the lowest interest rates in history, which have put mortgage rates at all-time lows.
Since 2010, mortgage defaults and delinquencies have both trended down back towards normal levels.
2. Student Loans
For the first time in history, consumers are more in debt to student loans than any other type of non-mortgage debt.
The amount of student debt per person has steadily increased each year – especially for young people. For 18-25 year olds, student loan debt per person has increased from $4,637 in 2005 to $10,552 in 2015. The average young millennial now owes over 60% of of their non-mortgage debt to student loans.
In total, Americans now have $1.3 trillion in student debt, spread between 44 million people.
3. Credit Cards and Private Label Cards
Credit card spending has been steadily increasing since the Financial Crisis, but it has not yet hit pre-crisis levels yet. As it stands, Americans have $665.8 billion in credit card debt spread between 391.9 million cards.
Debt from private label cards, on the other hand, has surpassed pre-crisis levels. Private label cards are typically used to provide credit at department stores, furniture stores, and other retail locations. It is now at $77.4 billion, though this is relatively small compared to other credit card debt that exists.
4. Auto Loans
Total outstanding balances on auto loans and leases have increased 9.3% year-over-year to $1.14 trillion – putting it at all-time highs and making it the third largest consumer debt market overall.
However, auto loan delinquencies have been generally trending down over recent years.
Putting it All Together
As far as non-mortgage debt goes, consumers have never been more indebted.
However, mortgage debt is what really moves the needle for total debt numbers – and that is still not near levels seen during the Financial Crisis.
|Student Loans||$1.27 trillion||Yes|
|Auto Loans||$1.14 trillion||Yes|
|Credit Card||$0.67 trillion||No|
|Private Label Cards||$0.08 trillion||Yes|
The World’s Biggest Real Estate Bubbles in 2021
According to UBS, there are nine real estate markets that are in bubble territory with prices rising to unsustainable levels.
Ranked: The World’s Biggest Real Estate Bubbles in 2021
Identifying real estate bubbles is a tricky business. After all, even though many of us “know a bubble when we see it”, we don’t have tangible proof of a bubble until it actually bursts.
And by then, it’s too late.
The map above, based on data from the Real Estate Bubble Index by UBS, serves as an early warning system, evaluating 25 global cities and scoring them based on their bubble risk.
Reading the Signs
Bubbles are hard to distinguish in real-time as investors must judge whether a market’s pricing accurately reflects what will happen in the future. Even so, there are some signs to watch out for.
As one example, a decoupling of prices from local incomes and rents is a common red flag. As well, imbalances in the real economy, such as excessive construction activity and lending can signal a bubble in the making.
With this in mind, which global markets are exhibiting the most bubble risk?
The Geography of Real Estate Bubbles
Europe is home to a number of cities that have extreme bubble risk, with Frankfurt topping the list this year. Germany’s financial hub has seen real home prices rise by 10% per year on average since 2016—the highest rate of all cities evaluated.
Two Canadian cities also find themselves in bubble territory: Toronto and Vancouver. In the former, nearly 30% of purchases in 2021 went to buyers with multiple properties, showing that real estate investment is alive and well. Despite efforts to cool down these hot urban markets, Canadian markets have rebounded and continued their march upward. In fact, over the past three decades, residential home prices in Canada grew at the fastest rates in the G7.
Despite civil unrest and unease over new policies, Hong Kong still has the second highest score in this index. Meanwhile, Dubai is listed as “undervalued” and is the only city in the index with a negative score. Residential prices have trended down for the past six years and are now down nearly 40% from 2014 levels.
Note: The Real Estate Bubble Index does not currently include cities in Mainland China.
Trending Ever Upward
Overheated markets are nothing new, though the COVID-19 pandemic has changed the dynamic of real estate markets.
For years, house price appreciation in city centers was all but guaranteed as construction boomed and people were eager to live an urban lifestyle. Remote work options and office downsizing is changing the value equation for many, and as a result, housing prices in non-urban areas increased faster than in cities for the first time since the 1990s.
Even so, these changing priorities haven’t deflated the real estate market in the world’s global cities. Below are growth rates for 2021 so far, and how that compares to the last five years.
Overall, prices have been trending upward almost everywhere. All but four of the cities above—Milan, Paris, New York, and San Francisco—have had positive growth year-on-year.
Even as real estate bubbles continue to grow, there is an element of uncertainty. Debt-to-income ratios continue to rise, and lending standards, which were relaxed during the pandemic, are tightening once again. Add in the societal shifts occurring right now, and predicting the future of these markets becomes more difficult.
In the short term, we may see what UBS calls “the era of urban outperformance” come to an end.
Mapped: Distribution of Global GDP by Region
Where does the world’s economic activity take place? This cartogram shows the $94 trillion global economy divided into 1,000 hexagons.
Mapped: The Distribution of Global GDP by Region
Gross domestic product (GDP) measures the value of goods and services that an economy produces in a given year, but in a global context, it is typically shown using country-level data.
As a result, we don’t often get to see the nuances of the global economy, such as how much specific regions and metro areas contribute to global GDP.
In these cartograms, global GDP has been normalized to a base number of 1,000 in order to show a more regional breakdown of economic activity. Created by Reddit user /BerryBlue_Blueberry, the two maps show the distribution in different ways: by nominal GDP and by GDP adjusted for purchasing power parity (PPP).
Before diving in, let us give you some context on how these maps were designed. Each hexagon on the two maps represents 0.1% of the world’s overall GDP.
The number below each region, country or metropolitan area represents the number of hexagons covered by that entity. So in the nominal GDP map, the state of New York represents 20 hexagons (i.e. 2.0% of global GDP), while Munich’s metro area is 3 hexagons (0.3%).
Countries are further broken down based on size. Countries that make up more than 0.95% of global GDP are broken down into subdivisions, while countries that are smaller than 0.1% of GDP are grouped together. Metro areas that account for over 0.25% of global GDP are featured.
Finally, it should be noted that to account for some outdated subdivision participation data, the map creator calculated 2021 estimates for this using the formula: national GDP (2021) x % of subdivision participation (2017-2020).
Nominal vs. PPP
The above map is using nominal data, while the below map accounts for differences in purchasing power (PPP).
Adjusting for PPP takes into account the relative value of currencies and purchasing power in countries around the world. For example, $100 (or its exchange equivalent in Indian rupees) is generally going to be able to buy more in India than it is in the United States.
This is because goods and services are cheaper in India, meaning you can actually purchase more there for the same amount of money.
Anomalies in Global GDP Distribution
Breaking down global GDP distribution into cartograms highlights some interesting anomalies worth considering:
- North America, Europe, and East Asia, with a combined GDP of nearly $75 trillion, make up 80% of the world’s GDP in nominal terms.
- The U.S. State of California accounts for 3.7% of the world’s GDP by itself, which ranks higher than the United Kingdom’s total contribution of 3.3%.
- Canada as a country accounts for 2% of the world’s GDP, which is comparable to the GDP contribution of the Greater Tokyo Area at 2.2%.
- With a GDP of $3 trillion, India’s contribution overshadows the GDP of the whole African continent ($2.6 trillion).
- This visualization highlights the economic might of cities better than a conventional map. One standout example of this is in Ontario, Canada. The Greater Toronto Area completely eclipses the economy of the rest of the province.
Inequality of GDP Distribution
The fact that certain countries generate most of the world’s economic output is reflected in the above cartograms, which resize countries or regions accordingly.
Compared to wealthier nations, emerging economies still account for just a tiny sliver of the pie.
India, for example, accounts for 3.2% of global GDP in nominal terms, even though it contains 17.8% of the world’s population.
That’s why on the nominal map, India is about the same size as France, the United Kingdom, or Japan’s two largest metro areas (Tokyo and Osaka-Kobe)—but of course, these wealthier places have a far higher GDP per capita.
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