3/26/2014
Charlie Hall's Off The Charts
Dr. Charlie Hall
Overall, consumer debt, including mortgages, auto loans and credit cards, increased by $241 billion during the fourth quarter of last year—the largest quarter-to-quarter jump since the third quarter of 2007. But the most worrisome trend in this data, in my humble opinion, is that student debt increased to $1.08 trillion, up $53 billion in the last quarter of 2013 compared to the previous quarter.
Why do I feel this to be so disconcerting? For one thing, the growing student loan debt burden is one of the ongoing factors that’s hobbling the recovery of the housing market, which is a key driver of economic growth.
Regulators and industry experts warn that young adults can no longer save for down payments or qualify for the mortgages they need to buy their first homes. A recent survey found that mortgage originations have dropped $97 billion to $452 billion from the third quarter to the fourth quarter of 2013, which may reflect the end of the refinance boom, as well as a drop-off in home purchases.
While I remain bullish on the housing market for 2014, a separate analysis by the Mortgage Bankers’ Association found that loan applications for home purchases have slipped nearly 20% in the past four months compared to a year ago. It’s still very early in the year, however, and the projected housing starts forecast of 1.2 million units still seems reasonable.
GT
Dr. Charlie Hall is Ellison Chair in International Floriculture for Texas A&M University in College Station, Texas. He has also recently been appointed OFA’s chief economist to “provide vision, leadership, analysis and technical competence.” Dr. Hall can be reached at chall@tamu.edu.