The American housing market is booming, even though various aspects of the nation’s economy are struggling due to the coronavirus (COVID-19) pandemic. During the last quarter of 2020, the nation’s mortgage debt load reached a record high of $10 trillion, according to figures from the Federal Reserve Bank of New York. Low interest rates for home mortgages is a big catalyst for this boom in the housing market.
Consumers are taking advantage of record low interest rates when making home purchases. At the start of November 2020, mortgage rates reached a 12th record low in 2020. As a result, mortgage debt jumped by $85 billion between July and September 2020, reaching a high of $9.86 trillion.
Currently, mortgages make up the largest portion of total household debt in the country. This mortgage debt includes not only new home purchases but also refinancing existing loans. New mortgages were reported at a high of $1.05 trillion, which is the second-highest volume reported in recent history. The record still stands with the refinancing surge experienced in 2003.
Mortgage debt is still higher than what was reported during the 2008 financial crisis. However, unlike what was experienced during the last big recession, the number of borrowers with good credit, above 760 points, is significantly higher, indicating that these home buyers are able to handle this additional debt.
The housing market is not the only industry seeing a boom in sales. Car purchases have also increased to a record high of $1.36 trillion. This figure includes both new vehicle purchases and leases.
While many Americans are struggling financially due to the COVID-19 crisis, federal stimulus programs, including the forbearance one created by the CARES Act, have provided some relief, allowing them to remain in their homes. These programs are scheduled to cease at the end of 2020, however, which could lead to problems at the start of 2021 if these consumers are not able to catch up on missed payments.
According to the report, household debt has increased by $87 billion, to a national total of $14.35 trillion as of the last quarter. This figure is also a record high, surpassing what was previously reported during the first quarter of 2020.
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