These are the Americans choosing to take on more debt in the middle of a pandemic

Homes are where new American debt is growing the most right now.
Homes are where new American debt is growing the most right now.
Image: REUTERS/Mike Blake
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Americans are taking on much more debt during the pandemic, but it’s not because they’re buying more stuff, it’s because they are acquiring more space.

National shifts to remote work and learning, plus changes in consumer spending, are reflected in faster growth of housing-related debt than other kinds of credit during the pandemic.

Many more US mortgages

Recent data from the Federal Reserve Bank of New York shows total household debt increased by $87 billion to $14.35 trillion in the third quarter of 2020.

The majority of that growth, $84.8 billion, was in mortgage balances after home equity lines of credit balances fell by $13 billion. Auto loans and student loans grew by $26 billion for the same period.

Notably, credit card balances fell $10 billion. It follows a $76 billion decline in the second quarter. That was the steepest decline in card balances since the New York Fed began publishing these data in 1999. The bank said it reflected weak consumer demand during the pandemic and people paying down their balances.

The people taking on mortgage debt

Many people moved from dense cities to suburban and rural areas during the pandemic. Some are still renting in their new locales, but homebuyers are common in this group. The value of new and refinanced mortgage loans was the second highest ever, $1.05 trillion in the third quarter.

While the US continues to experience elevated unemployment, Americans who still have jobs and high credit scores are clearly driving the trend. National data from the New York Fed’s Consumer Credit Panel and Equifax show $754 billion of the new and refinanced mortgage loans in the third quarter, or 72%, came from applicants with the highest credit scores of over 760.

The US home construction boom continues

The shift from people living in block after block of apartment buildings to houses with yards has buoyed demand for new homes in the US. According to the latest data from the US Census Bureau and the US Department of Housing and Urban Development, builders started constructing new, single-family homes at a seasonally adjusted rate of 1,179,000 per year in October; a 29.4% increase compared to the same period last year and the sixth consecutive period of monthly growth.