Household debt declined by a seasonally adjusted annual rate of 0.6%, dragged lower by a 2.4% decline in mortgage debt as consumers took out fewer mortgages, paid off or had debts forgiven, the Federal Reserve reported in its voluminous flow-of-funds report. Consumer credit outside mortgages rose by 3.4%.
Owners had 38.6% of the equity in their houses—unchanged from the first quarter but well below the 49.5% of 2007 as the housing market began to tumble. Household real estate was worth $16.18 trillion, a 0.4% dip from the first quarter but about 29% lower than the peak in the fourth quarter of 2006.
Businesses outside the financial sector expanded their credit at a 4% annualized rate. State and local governments borrowed 3.2% less, while the federal government—which doesn’t face balanced-budget rules that local authorities encounter—expanded their borrowing by 8.6% annualized
Total nonfinancial sector borrowing rose by 3% to $36.52 trillion.
The financial sector also continued to deleverage, borrowing 7.8% less in the 10th straight negative quarter.
The corporate sector continued to stockpile cash, reaching a record $2.05 trillion at the end of the second quarter, up from $1.96 trillion at the end of the first quarter and as little as $1.4 trillion in 2008.
Household and nonprofit organization net worth was $58.46 trillion, a small $149 billion reduction from the first quarter but well off the $65.8 trillion peak from the second quarter of 2007.
Steve Goldstein is MarketWatch’s Washington bureau chief.
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