U.S. Households' Borrowing Slows To Nine-year Low, Fed Says
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DOW JONES NEWSWIRES
By Rex Nutting
WASHINGTON (Dow Jones) -- U.S. households were richer than ever before in the first quarter, but they were taking on less debt and pulling out less cash from their homes, the Federal Reserve said Thursday in its quarterly flow-of-funds report.
Households slowed the growth of debt to a 6% annualized rate, the slowest in nine years. Mortgage debt increased at a 6.2% pace, the slowest in eight years, the Fed said.
Before the recent slowdown, net debt outstanding had risen nearly 50% since the last recession ended late in 2001 -- a major stimulus to the economy over that time.
During the first quarter, household net worth increased by $587.4 billion to a record $56.18 trillion, a 4.3% annual growth rate. Assets increased $725 billion to stand at $69.6 trillion, while liabilities rose $137 billion to $13.4 trillion.
Households' real-estate holdings increased by $151.4 billion, while holdings of corporate equities rose $60 billion. Holdings in mutual funds grew by $67.6 billion.
The Fed's flow-of-funds report is the most comprehensive look at the financial flows, levels and balances in the economy, akin to the report on gross domestic product that illustrates the output and spending side of the economy.
Total borrowing in the economy slowed to the weakest growth in four years, rising an annualized 7.3%. Borrowing by businesses increased 9%. Corporate borrowing increased 9.1%.
Households cut back on the equity they extracted from their homes again in the first quarter. By one simple measure, the cash that homeowners took out from new mortgages dropped to a seasonally adjusted annual rate of $151 billion in the first quarter, down from about $168 billion in the fourth quarter of 2006.
The first quarter's tally marked the smallest amount of cashing out seen since the first quarter of 2001. Home equity extraction peaked at $575 billion in 2005. |
