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Finance and Economics Discussion Series: 2007-37 Screen Reader version ^♣

The Rise in U.S. Household Indebtedness: Causes and Consequences

Karen E. Dynan

Federal Reserve Board

Donald L. Kohn

Federal Reserve Board

August 8, 2007

Figure 1: The Evolution of Household Saving and Debt in the United States
Upper Panel
Personal Saving Rate

Year	Annual Average
1980	10
1981	10.9
1982	11.2
1983	9
1984	10.8
1985	9
1986	8.2
1987	7
1988	7.3
1989	7.1
1990	7
1991	7.3
1992	7.7
1993	5.8
1994	4.8
1995	4.6
1996	4
1997	3.6
1998	4.3
1999	2.4
2000	2.3
2001	1.8
2002	2.4
2003	2.1
2004	2.1
2005	0.5
2006	0.4

Source: U.S. National Income and Product Accts

Figure 1: The Evolution of Household Saving and Debt in the United States
Lower Panel
Ratio of Household Sector Debt to Personal Income

Year	Ratio, End-of-Year
1980	0.57
1981	0.56
1982	0.56
1983	0.56
1984	0.57
1985	0.63
1986	0.67
1987	0.68
1988	0.7
1989	0.71
1990	0.73
1991	0.74
1992	0.72
1993	0.74
1994	0.76
1995	0.78
1996	0.78
1997	0.78
1998	0.78
1999	0.8
2000	0.82
2001	0.87
2002	0.95
2003	1.01
2004	1.06
2005	1.12
2006	1.14

Source: U.S. Flow of Funds Accounts and National Income and Product Accts

Figure 2: Evidence on Impatience
Upper Left Panel
Planning Horizon 1 Year or Less

Year	Share of HHs
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992	36.68
1993
1994
1995	39.11
1996
1997
1998	33.34
1999
2000
2001	29.8
2002
2003
2004	33.19
2005
2006

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Upper Right Panel
Planning Horizon 1 Year or Less

Year	Share of HHs
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992	15.01
1993
1994
1995	11.8
1996
1997
1998	14.95
1999
2000
2001	16.93
2002
2003
2004	13.32
2005
2006

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Middle Left Panel
Saving for Retirement

Year	Share of HHs
1981
1982
1983	16.62
1984
1985
1986
1987
1988
1989	18.69
1990
1991
1992	19.37
1993
1994
1995	23.75
1996
1997
1998	32.95
1999
2000
2001	32.07
2002
2003
2004	34.66
2005
2006

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Middle Right Panel
Saving for Retirement
Residuals from Regression on Age

Year	Share of HHs
1981
1982
1983	-10.1
1984
1985
1986
1987
1988
1989	-8.7
1990
1991
1992	-8.29
1993
1994
1995	-4.01
1996
1997
1998	5.05
1999
2000
2001	3.86
2002
2003
2004	6.33
2005
2006

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Lower Left Panel
Okay to Borrow for Car Purchase

Year	Share of HHs
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992	77.71
1993
1994
1995	80.75
1996
1997
1998	79.13
1999
2000
2001	78.85
2002
2003
2004	80.67
2005
2006

Source: Survey of Consumer Finances

Figure 2: Evidence on Impatience
Lower Right Panel
Okay to Borrow for Vacation

Year	Share of HHs
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992	12.96
1993
1994
1995	16.12
1996
1997
1998	14.32
1999
2000
2001	14.89
2002
2003
2004	14.38
2005
2006

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Upper Left Panel
Willingness to Take No Risk
to Get Returns

Year	Share of HHs
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992	49.83
1993
1994
1995	45.66
1996
1997
1998	38.75
1999
2000
2001	39.8
2002
2003
2004	42.31
2005
2006

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Upper Right Panel
Willingness to Take Above Average
Risk to Get Returns

Year	Share of HHs
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992	14.27
1993
1994
1995	17.09
1996
1997
1998	22.79
1999
2000
2001	22.77
2002
2003
2004	19.25
2005
2006

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Middle Left Panel
Saving for Liquidity

Year	Share of HHs
1981
1982
1983	40.68
1984
1985
1986
1987
1988
1989	34.38
1990
1991
1992	33.94
1993
1994
1995	32.99
1996
1997
1998	29.8
1999
2000
2001	31.19
2002
2003
2004	30.05
2005
2006

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Middle Right Panel
Saving for Liquidity
Residuals from Regression on Age

Year	Share of HHs
1981
1982
1983	9.55
1984
1985
1986
1987
1988
1989	3.13
1990
1991
1992	2.65
1993
1994
1995	1.72
1996
1997
1998	-1.49
1999
2000
2001	-0.09
2002
2003
2004	-1.31
2005
2006

Source: Survey of Consumer Finances

Figure 3: Evidence on Precautionary Saving and Expected Income
Lower Panel
Expected Change in Real Income

Year	Index
1980.00	57.2
1980.25	65.5
1980.50	67.3
1980.75	69.8
1981.00	70.7
1981.25	75.6
1981.50	75.6
1981.75	72.6
1982.00	80.6
1982.25	81.4
1982.50	77.4
1982.75	84.3
1983.00	82.3
1983.25	89.7
1983.50	85.3
1983.75	86.5
1984.00	93.5
1984.25	90.1
1984.50	93.8
1984.75	92.6
1985.00	85.1
1985.25	88.5
1985.50	87.4
1985.75	87.4
1986.00	87.6
1986.25	90.3
1986.50	91.4
1986.75	88.5
1987.00	84.2
1987.25	83.1
1987.50	83.1
1987.75	85.4
1988.00	87.6
1988.25	85.1
1988.50	88.9
1988.75	83.3
1989.00	81.1
1989.25	79.3
1989.50	81
1989.75	83.7
1990.00	81.6
1990.25	84.6
1990.50	76.5
1990.75	68.8
1991.00	77.9
1991.25	75.2
1991.50	78.7
1991.75	75.9
1992.00	77.6
1992.25	85.5
1992.50	77.1
1992.75	85.2
1993.00	82.4
1993.25	77.5
1993.50	80.1
1993.75	77.7
1994.00	84.5
1994.25	82.2
1994.50	77.2
1994.75	80
1995.00	81.8
1995.25	82.8
1995.50	84.2
1995.75	80
1996.00	83.1
1996.25	79
1996.50	85.1
1996.75	85.3
1997.00	84.7
1997.25	85.6
1997.50	85.2
1997.75	90.4
1998.00	93.6
1998.25	92.6
1998.50	97.9
1998.75	89.2
1999.00	94.9
1999.25	89.4
1999.50	92.6
1999.75	93.6
2000.00	95.2
2000.25	93.5
2000.50	93.2
2000.75	91.7
2001.00	90.9
2001.25	86.9
2001.50	91.3
2001.75	92.3
2002.00	94.2
2002.25	89.2
2002.50	90.2
2002.75	90.8
2003.00	85.6
2003.25	89.4
2003.50	88.8
2003.75	88.8
2004.00	89
2004.25	81.7
2004.50	83.4
2004.75	83.5
2005.00	83.4
2005.25	77.6
2005.50	78.6
2005.75	77.3
2006.00	76.6
2006.25	76.5
2006.50	80.8
2006.75	86.2
2007.00	82.3
2007.25	76.3

Source: Reuters/University of Michigan Surveys of Consumers
Note: Calculated as the share expecting their income to rise more than prices less the share expecting prices to rise more than their incomes + 100

Figure 3: Evidence on Precautionary Saving and Expected Income
Lower Panel
Expected Change in Real Income

Year	Index
1980.00	57.2
1980.25	65.5
1980.50	67.3
1980.75	69.8
1981.00	70.7
1981.25	75.6
1981.50	75.6
1981.75	72.6
1982.00	80.6
1982.25	81.4
1982.50	77.4
1982.75	84.3
1983.00	82.3
1983.25	89.7
1983.50	85.3
1983.75	86.5
1984.00	93.5
1984.25	90.1
1984.50	93.8
1984.75	92.6
1985.00	85.1
1985.25	88.5
1985.50	87.4
1985.75	87.4
1986.00	87.6
1986.25	90.3
1986.50	91.4
1986.75	88.5
1987.00	84.2
1987.25	83.1
1987.50	83.1
1987.75	85.4
1988.00	87.6
1988.25	85.1
1988.50	88.9
1988.75	83.3
1989.00	81.1
1989.25	79.3
1989.50	81
1989.75	83.7
1990.00	81.6
1990.25	84.6
1990.50	76.5
1990.75	68.8
1991.00	77.9
1991.25	75.2
1991.50	78.7
1991.75	75.9
1992.00	77.6
1992.25	85.5
1992.50	77.1
1992.75	85.2
1993.00	82.4
1993.25	77.5
1993.50	80.1
1993.75	77.7
1994.00	84.5
1994.25	82.2
1994.50	77.2
1994.75	80
1995.00	81.8
1995.25	82.8
1995.50	84.2
1995.75	80
1996.00	83.1
1996.25	79
1996.50	85.1
1996.75	85.3
1997.00	84.7
1997.25	85.6
1997.50	85.2
1997.75	90.4
1998.00	93.6
1998.25	92.6
1998.50	97.9
1998.75	89.2
1999.00	94.9
1999.25	89.4
1999.50	92.6
1999.75	93.6
2000.00	95.2
2000.25	93.5
2000.50	93.2
2000.75	91.7
2001.00	90.9
2001.25	86.9
2001.50	91.3
2001.75	92.3
2002.00	94.2
2002.25	89.2
2002.50	90.2
2002.75	90.8
2003.00	85.6
2003.25	89.4
2003.50	88.8
2003.75	88.8
2004.00	89
2004.25	81.7
2004.50	83.4
2004.75	83.5
2005.00	83.4
2005.25	77.6
2005.50	78.6
2005.75	77.3
2006.00	76.6
2006.25	76.5
2006.50	80.8
2006.75	86.2
2007.00	82.3
2007.25	76.3

Source: Reuters/University of Michigan Surveys of Consumers
Note: Calculated as the share expecting their income to rise more than prices less the share expecting prices to rise more than their incomes + 100

Figure 4: Debt and Demographics
Upper Left Panel
Household with Positive Debt
By Age (Percent)

Year	younger than 35	35 to 54	55 or older
1981
1982
1983	79.33	84.27	47.23
1984
1985
1986
1987
1988
1989	80.19	87.29	50.65
1990
1991
1992	81.65	85.94	53.04
1993
1994
1995	84.03	86.66	53.88
1996
1997
1998	81.81	87.56	52.86
1999
2000
2001	83.03	86.64	55.74
2002
2003
2004	80.06	88.48	60.77
2005
2006

Source: Survey of Consumer Finances

Figure 4: Debt and Demographics
Upper Right Panel
Median D/Y for Borrowers
By Age (Ratio)

Year	younger than 35	35 to 54	55 or older
1981
1982
1983	0.42	0.57	0.26
1984
1985
1986
1987
1988
1989	0.56	0.64	0.28
1990
1991
1992	0.47	0.79	0.36
1993
1994
1995	0.61	0.82	0.4
1996
1997
1998	0.8	0.94	0.56
1999
2000
2001	0.74	0.91	0.53
2002
2003
2004	1.08	1.27	0.71
2005
2006

Source: Survey of Consumer Finances

Figure 4: Debt and Demographics
Middle Left Panel
Household with Positive Debt
By Education (Percent)

Year	No HS Degree	HS Degree Only	College Degree
1981
1982
1983	51.21	74.75	83.98
1984
1985
1986
1987
1988
1989	55.81	74.49	83.11
1990
1991
1992	52.66	75.52	82.96
1993
1994
1995	54.97	77.42	82.23
1996
1997
1998	53.43	74.55	84.26
1999
2000
2001	55.75	76.54	82.38
2002
2003
2004	53.48	77.43	84.29
2005
2006

Source: Survey of Consumer Finances

Figure 4: Debt and Demographics
Middle Right Panel
Median D/Y for Borrowers
By Education (Ratio)

Year	No HS Degree	HS Degree Only	College Degree
1981
1982
1983	0.22	0.41	0.64
1984
1985
1986
1987
1988
1989	0.3	0.5	0.71
1990
1991
1992	0.33	0.49	0.82
1993
1994
1995	0.42	0.59	0.86
1996
1997
1998	0.44	0.79	1.01
1999
2000
2001	0.47	0.7	0.95
2002
2003
2004	0.51	0.92	1.3
2005
2006

Source: Survey of Consumer Finances

Figure 4: Debt and Demographics
Lower Panel
Coefficients from Median Regression of D/Y on Demographic Characteristics (Percent)

Year	Without Demographic Controls	With Demographic Controls
1987
1988
1989	0.14	0.07
1990
1991
1992	0.15	0.05
1993
1994
1995	0.25	0.12
1996
1997
1998	0.35	0.22
1999
2000
2001	0.32	0.17
2002
2003
2004	0.57	0.38
2005
2006

Source: Survey of Consumer Finances

Figure 5: Debt and House Prices
Upper Left Panel
Composition of the Aggregate D/Y
Survey of Consumer Finances (Ratio)

Year	Lower Line	Upper Line
1981
1982
1983	0.29	0.64
1984
1985
1986
1987
1988
1989	0.2	0.64
1990
1991
1992	0.22	0.79
1993
1994
1995	0.22	0.81
1996
1997
1998	0.25	0.89
1999
2000
2001	0.2	0.79
2002
2003
2004	0.28	1.12
2005
2006

Source: Survey of Consumer Finances
(In Figure, the space between the horizontal axis and the lower line is labelled Other Debt and the space between the lower and upper lines is labelled Primary Residence Debt)

Figure 5: Debt and House Prices
Upper Right Panel
Composition of the Aggregate D/Y
Flow of Funds (Ratio)

Year	Lower Line	Upper Line
1981
1982
1983	0.2	0.56
1984	0.21	0.57
1985	0.23	0.63
1986	0.23	0.67
1987	0.23	0.68
1988	0.23	0.7
1989	0.23	0.71
1990	0.22	0.73
1991	0.21	0.74
1992	0.21	0.72
1993	0.21	0.74
1994	0.23	0.76
1995	0.25	0.78
1996	0.25	0.78
1997	0.25	0.78
1998	0.25	0.78
1999	0.25	0.8
2000	0.26	0.82
2001	0.27	0.87
2002	0.28	0.95
2003	0.28	1.01
2004	0.27	1.06
2005	0.28	1.12
2006	0.28	1.14

Source: Flow of Funds
(In Figure, the space between the horizontal axis and the lower line is labeled Other Debt and the space between the lower and upper lines is labeled Home Mortgage Debt)

Figure 5: Debt and House Prices
Middle Left Panel
Home Mortgage Debt and House Prices (4-Quarter Percent Change)

Quarter	House Prices	Home Mortgage Debt
1981.00	5.77	9.83
1981.25	6.77	10.32
1981.50	4.82	8.95
1981.75	4.76	7.23
1982.00	4.97	6.61
1982.25	3.55	5.19
1982.50	1.78	4.46
1982.75	2.28	4.75
1983.00	2.77	5.52
1983.25	3.22	6.91
1983.50	4.4	8.94
1983.75	3.86	10.19
1984.00	3.71	11.56
1984.25	4.36	11.87
1984.50	4.63	11.47
1984.75	5.47	11.4
1985.00	5.36	12.05
1985.25	5.34	11.86
1985.50	6.23	13.69
1985.75	6.51	14.5
1986.00	7.05	13.04
1986.25	7.61	13.42
1986.50	7.65	13.32
1986.75	8.16	13.73
1987.00	8.38	14.55
1987.25	8.09	15.66
1987.50	7.77	14.51
1987.75	6.79	13.45
1988.00	6.35	12.58
1988.25	6.58	11.85
1988.50	6.08	11.75
1988.75	6.21	11.8
1989.00	5.75	10.94
1989.25	4.91	10.24
1989.50	6.15	10.38
1989.75	6.04	10.96
1990.00	5.08	11.37
1990.25	3.67	11.24
1990.50	1.7	10.27
1990.75	0.26	8.73
1991.00	0.62	8.3
1991.25	0.98	8.16
1991.50	0.56	6.91
1991.75	1.75	6.95
1992.00	1.74	6.82
1992.25	1.56	5.64
1992.50	2.49	6.55
1992.75	2.27	6.39
1993.00	0.97	5.38
1993.25	2.31	6.09
1993.50	2.32	5.89
1993.75	2.36	5.5
1994.00	3.37	6.07
1994.25	3.39	5.66
1994.50	3.26	5.37
1994.75	2.65	5.54
1995.00	2.28	5.31
1995.25	2.21	5.26
1995.50	2.44	5.34
1995.75	2.47	4.84
1996.00	3.18	5.58
1996.25	3.27	5.88
1996.50	3.01	5.81
1996.75	3.06	6.17
1997.00	2.67	6.01
1997.25	2.93	5.82
1997.50	3.06	6.52
1997.75	3.41	6.11
1998.00	4.06	6.43
1998.25	4.52	7
1998.50	5.09	6.62
1998.75	5.66	8.03
1999.00	5.89	8.59
1999.25	6.01	8.77
1999.50	6.24	9.69
1999.75	6.17	9.35
2000.00	6.52	8.86
2000.25	6.78	9.03
2000.50	6.9	8.58
2000.75	7.24	8.52
2001.00	7.32	8.71
2001.25	7.35	9.27
2001.50	7.43	9.64
2001.75	7.25	10.1
2002.00	7.09	10.67
2002.25	7.32	10.56
2002.50	7.82	11.54
2002.75	8.32	12.88
2003.00	8.4	13.4
2003.25	8.17	14.72
2003.50	8.15	15.1
2003.75	8.44	14.37
2004.00	8.87	14.15
2004.25	9.47	13.68
2004.50	10	13.76
2004.75	10.25	14.22
2005.00	10.42	13.71
2005.25	10.93	13.52
2005.50	10.9	13.6
2005.75	10.65	13.44
2006.00	10.04	13.45
2006.25	8.39	12.48
2006.50	6.08	10.81
2006.75	4.31	9.33

Source: Flow of Funds and Office of Federal Housing Enterprise Oversight

Figure 5: Debt and House Prices
Middle Right Panel
Home Mortgage Debt and House Prices

Quarter	House Prices	Home Mortgage Debt
1981.00	105.77	944.55
1981.25	107.86	966.1
1981.50	109.29	980.86
1981.75	109.67	998.22
1982.00	111.03	1012.69
1982.25	111.69	1021.95
1982.50	111.24	1017.13
1982.75	112.17	1031.15
1983.00	114.1	1033.14
1983.25	115.29	1057.11
1983.50	116.14	1085.78
1983.75	116.5	1116.23
1984.00	118.33	1152.91
1984.25	120.32	1182.02
1984.50	121.52	1209.76
1984.75	122.87	1242.83
1985.00	124.67	1316.13
1985.25	126.75	1347.4
1985.50	129.09	1400.64
1985.75	130.87	1448.31
1986.00	133.46	1487.82
1986.25	136.4	1528.26
1986.50	138.97	1587.18
1986.75	141.55	1647.04
1987.00	144.65	1692.64
1987.25	147.43	1755.91
1987.50	149.77	1802.3
1987.75	151.16	1826.56
1988.00	153.84	1885.67
1988.25	157.13	1944.23
1988.50	158.87	1997.71
1988.75	160.54	2052.79
1989.00	162.69	2090.18
1989.25	164.84	2141.71
1989.50	168.64	2203.39
1989.75	170.24	2275.99
1990.00	170.95	2357.04
1990.25	170.89	2411.53
1990.50	171.5	2458.86
1990.75	170.68	2503.74
1991.00	172.02	2552.65
1991.25	172.57	2608.32
1991.50	172.46	2628.83
1991.75	173.67	2681.41
1992.00	175.01	2730.3
1992.25	175.27	2759.01
1992.50	176.76	2804.5
1992.75	177.61	2852.68
1993.00	176.71	2877.26
1993.25	179.31	2927.08
1993.50	180.86	2969.78
1993.75	181.8	3011.89
1994.00	182.66	3054.41
1994.25	185.38	3095.08
1994.50	186.76	3131.68
1994.75	186.62	3178.87
1995.00	186.83	3216.67
1995.25	189.48	3257.85
1995.50	191.32	3298.84
1995.75	191.23	3332.7
1996.00	192.76	3396.28
1996.25	195.67	3449.45
1996.50	197.08	3490.59
1996.75	197.08	3538.16
1997.00	197.9	3600.44
1997.25	201.4	3650.15
1997.50	203.12	3718.09
1997.75	203.8	3754.25
1998.00	205.94	3831.97
1998.25	210.5	3905.55
1998.50	213.46	3964.27
1998.75	215.35	4055.9
1999.00	218.07	4160.97
1999.25	223.14	4248.04
1999.50	226.77	4348.58
1999.75	228.64	4432.87
2000.00	232.27	4527.52
2000.25	238.26	4629.17
2000.50	242.41	4719.19
2000.75	245.19	4810.46
2001.00	249.29	4921.74
2001.25	255.77	5058.47
2001.50	260.42	5174.25
2001.75	262.96	5296.42
2002.00	266.97	5447.11
2002.25	274.5	5592.48
2002.50	280.78	5771.2
2002.75	284.84	5978.56
2003.00	289.38	6177.22
2003.25	296.93	6415.62
2003.50	303.68	6642.82
2003.75	308.87	6837.65
2004.00	315.06	7051.01
2004.25	325.04	7293.21
2004.50	334.04	7571.57
2004.75	340.54	7824.5
2005.00	347.9	8032.43
2005.25	360.56	8294.38
2005.50	370.44	8601.31
2005.75	376.82	8876.29
2006.00	382.84	9112.55
2006.25	390.8	9329.24
2006.50	392.95	9530.86
2006.75	393.07	9704.67

Source: Flow of Funds and Office of Federal Housing Enterprise Oversight
1980 = 100 for House Prices, $ Billion for Mortgage Debt

Figure 5: Debt and House Prices
Lower Left Panel
Household with Positive Debt
By Homeownership (Percent)

Year	Homeowners	Non-homeowners
1981
1982
1983	75.51	61.06
1984
1985
1986
1987
1988
1989	78.19	62.08
1990
1991
1992	78.44	64.06
1993
1994
1995	79.76	65.51
1996
1997
1998	79.53	64.09
1999
2000
2001	79.93	65.24
2002
2003
2004	82.3	63.44
2005
2006

Source: Survey of Consumer Finances

Figure 5: Debt and House Prices
Lower Right Panel
Median D/Y for Borrowers
By Homeownership (Percent) YearHomeownersNon-homeowners

1981
1982
1983	0.72	0.12
1984
1985
1986
1987
1988
1989	0.78	0.18
1990
1991
1992	0.94	0.18
1993
1994
1995	1.02	0.22
1996
1997
1998	1.19	0.25
1999
2000
2001	1.12	0.21
2002
2003
2004	1.47	0.26
2005
2006

Source: Survey of Consumer Finances

Figure 6: Financial Innovation and Debt
Upper Left Panel
Household with Positive Debt

Year	Percent
1981
1982
1983	70.21
1984
1985
1986
1987
1988
1989	72.39
1990
1991
1992	73.25
1993
1994
1995	74.76
1996
1997
1998	74.37
1999
2000
2001	75.21
2002
2003
2004	76.49
2005
2006

Source: Survey of Consumer Finances

Figure 6: Financial Innovation and Debt
Upper Right Panel
Aggregate D/Y (Ratio)

Year	Actual	Counterfactual: Share of Borrowers Held at 1983 Level
1981
1982
1983	0.64	0.64
1984
1985
1986
1987
1988
1989	0.64	0.63
1990
1991
1992	0.79	0.76
1993
1994
1995	0.81	0.78
1996
1997
1998	0.89	0.85
1999
2000
2001	0.79	0.75
2002
2003
2004	1.12	1.04
2005
2006

Source: Survey of Consumer Finances

Figure 6: Financial Innovation and Debt
Middle Left Panel
Percentiles of D/Y (Ratio)
Upper Half of Distribution

Year	50th pctile	75th pctile	90th pctile	95th pctile
1981
1982
1983	0.14	0.75	1.55	2.18
1984
1985
1986
1987
1988
1989	0.23	0.88	1.74	2.43
1990
1991
1992	0.24	1.05	1.98	2.82
1993
1994
1995	0.31	1.19	2.26	3.16
1996
1997
1998	0.38	1.34	2.44	3.37
1999
2000
2001	0.38	1.28	2.35	3.24
2002
2003
2004	0.54	1.79	3.1	4.21
2005
2006

Source: Survey of Consumer Finances

Figure 6: Financial Innovation and Debt
Middle Right Panel
Median D/Y for Borrowers (Ratio)
By Income (for HHs < 60)

Year	Lower Third	Middle Third	Upper Third
1981
1982
1983	0.31	0.39	0.63
1984
1985
1986
1987
1988
1989	0.43	0.61	0.73
1990
1991
1992	0.45	0.55	0.9
1993
1994
1995	0.49	0.69	0.94
1996
1997
1998	0.56	0.85	1.06
1999
2000
2001	0.55	0.91	0.96
2002
2003
2004	0.73	1.3	1.25
2005
2006

Source: Survey of Consumer Finances

Figure 7: Household Vulnerability to Economic Shocks
Upper Left Panel
Household Financial Obligations
(Percent of Disposable Income)

Year	Debt Service Ratio	Financial Obligations Ratio
1981	10.65	15.52
1982	10.68	15.67
1983	10.58	15.59
1984	10.81	15.72
1985	11.57	16.71
1986	12.06	17.37
1987	12.14	17.64
1988	11.89	17.25
1989	11.93	17.22
1990	11.98	17.31
1991	11.75	17.19
1992	11.05	16.44
1993	10.89	16.31
1994	11.05	16.56
1995	11.65	17.23
1996	12	17.56
1997	12.12	17.71
1998	12.04	17.5
1999	12.32	17.82
2000	12.59	17.94
2001	13.15	18.55
2002	13.39	18.69
2003	13.52	18.63
2004	13.54	18.47
2005	14.14	19.05
2006	14.45	19.3

Source: Federal Reserve Board

Figure 7: Household Vulnerability to Economic Shocks
Upper Right Panel
Household Real Estate and Equity Wealth
(Ratio to Personal Income)

Year	Value of Real Estate	Value of Equities
1981	1.23	0.46
1982	1.22	0.49
1983	1.17	0.53
1984	1.21	0.46
1985	1.29	0.56
1986	1.34	0.62
1987	1.35	0.59
1988	1.37	0.62
1989	1.38	0.72
1990	1.33	0.63
1991	1.32	0.85
1992	1.29	0.89
1993	1.29	1
1994	1.27	0.95
1995	1.28	1.22
1996	1.25	1.38
1997	1.24	1.67
1998	1.26	1.81
1999	1.3	2.16
2000	1.33	1.79
2001	1.42	1.5
2002	1.54	1.12
2003	1.63	1.39
2004	1.71	1.42
2005	1.83	1.41
2006	1.84	1.46

Source: Flow of Funds and National Income and Product Accounts

Figure 7: Household Vulnerability to Economic Shocks
Middle Panel
Estimated MPC Out of Contemporaneous Income

Quarter	Lowest Line (Dashed)	Middle Line (solid)	Highest Line (dashed)
1965.00
1965.25	-0.33	0.25	0.83
1965.50	-0.55	0.1	0.75
1965.75	-0.59	0.04	0.68
1966.00	-0.36	0.26	0.89
1966.25	0.05	0.69	1.34
1966.50	0.03	0.66	1.29
1966.75	-0.1	0.62	1.34
1967.00	-0.23	0.51	1.26
1967.25	-0.16	0.6	1.36
1967.50	-0.13	0.6	1.34
1967.75	0.11	0.74	1.37
1968.00	0.03	0.65	1.27
1968.25	-0.01	0.7	1.41
1968.50	-0.49	0.25	0.99
1968.75	-0.33	0.33	0.99
1969.00	-0.42	0.1	0.61
1969.25	-0.36	0.12	0.61
1969.50	-0.24	0.23	0.7
1969.75	-0.33	0.15	0.63
1970.00	-0.37	0.13	0.62
1970.25	-0.59	-0.04	0.51
1970.50	-0.6	-0.07	0.46
1970.75	-0.57	-0.03	0.5
1971.00	-0.77	-0.16	0.46
1971.25	-1.02	-0.3	0.42
1971.50	-0.65	-0.07	0.5
1971.75	-0.57	-0.04	0.48
1972.00	-0.26	0.12	0.5
1972.25	-0.38	0.05	0.48
1972.50	-0.32	0.11	0.53
1972.75	-0.59	-0.03	0.53
1973.00	-0.45	0.09	0.62
1973.25	-0.21	0.35	0.92
1973.50	-0.13	0.45	1.04
1973.75	-0.14	0.53	1.2
1974.00	-0.8	0.11	1.03
1974.25	-1.22	-0.2	0.81
1974.50	-0.74	0.07	0.88
1974.75	-0.74	0.14	1.01
1975.00	-0.99	0.02	1.03
1975.25	-0.4	0.16	0.73
1975.50	-0.08	0.85	1.77
1975.75	0	0.62	1.25
1976.00	-0.01	0.55	1.12
1976.25	0.03	0.57	1.11
1976.50	-0.1	0.47	1.03
1976.75	-0.1	0.5	1.1
1977.00	-0.06	0.41	0.88
1977.25	-0.05	0.41	0.87
1977.50	-0.05	0.42	0.9
1977.75	-0.05	0.43	0.92
1978.00	-0.05	0.41	0.88
1978.25	-0.12	0.34	0.8
1978.50	-0.03	0.44	0.91
1978.75	0.03	0.47	0.91
1979.00	0.05	0.46	0.88
1979.25	0	0.39	0.77
1979.50	0.02	0.43	0.83
1979.75	0.06	0.5	0.93
1980.00	0.1	0.54	0.98
1980.25	0.24	0.64	1.03
1980.50	0.22	0.62	1.02
1980.75	0.25	0.62	0.98
1981.00	0.21	0.61	1
1981.25	0.19	0.6	1.01
1981.50	0.18	0.55	0.93
1981.75	0.18	0.63	1.09
1982.00	0.18	0.64	1.09
1982.25	0.15	0.6	1.06
1982.50	0.13	0.65	1.17
1982.75	0.08	0.63	1.17
1983.00	0.11	0.62	1.13
1983.25	0.11	0.58	1.04
1983.50	0.06	0.52	0.97
1983.75	0.11	0.52	0.92
1984.00	0.04	0.39	0.74
1984.25	0.05	0.38	0.71
1984.50	0.04	0.37	0.69
1984.75	-0.01	0.32	0.64
1985.00	-0.02	0.29	0.61
1985.25	-0.22	0.25	0.72
1985.50	-0.3	0.18	0.65
1985.75	-0.31	0.17	0.65
1986.00	-0.28	0.19	0.66
1986.25	-0.28	0.22	0.71
1986.50	-0.11	0.33	0.77
1986.75	-0.12	0.33	0.77
1987.00	-0.19	0.29	0.76
1987.25	-0.23	0.25	0.73
1987.50	-0.27	0.16	0.59
1987.75	-0.33	0.09	0.51
1988.00	-0.35	0.07	0.49
1988.25	-0.32	0.08	0.48
1988.50	-0.34	0.06	0.45
1988.75	-0.33	0.06	0.45
1989.00	-0.31	0.06	0.42
1989.25	-0.37	0.02	0.41
1989.50	-0.29	0.08	0.44
1989.75	-0.26	0.1	0.46
1990.00	-0.24	0.1	0.44
1990.25	-0.35	0.01	0.37
1990.50	-0.42	-0.02	0.38
1990.75	-0.47	-0.06	0.35
1991.00	-0.58	-0.13	0.33
1991.25	-0.71	-0.15	0.42
1991.50	-1.1	-0.33	0.43
1991.75	-0.79	-0.14	0.5
1992.00	-0.53	0.04	0.61
1992.25	-0.59	-0.03	0.53
1992.50	-0.61	-0.14	0.34
1992.75	-0.67	-0.18	0.3
1993.00	-0.57	-0.09	0.38
1993.25	-0.57	-0.1	0.36
1993.50	-0.55	-0.08	0.38
1993.75	-0.5	-0.07	0.36
1994.00	-0.43	0.15	0.73
1994.25	-0.41	0.21	0.82
1994.50	-0.39	0.14	0.68
1994.75	-0.4	0.18	0.76
1995.00	-0.33	0.21	0.74
1995.25	-0.3	0.18	0.67
1995.50	-0.26	0.2	0.66
1995.75	-0.29	0.21	0.7
1996.00	-0.24	0.2	0.64
1996.25	-0.18	0.25	0.67
1996.50	-0.23	0.16	0.55
1996.75	-0.26	0.15	0.56
1997.00	-0.29	0.09	0.46
1997.25	-0.38	0.06	0.49
1997.50	-0.41	0.03	0.47
1997.75	-0.48	-0.04	0.4
1998.00	-0.5	-0.1	0.31
1998.25	-0.5	-0.09	0.31
1998.50	-0.35	0.01	0.37
1998.75	-0.36	-0.01	0.35
1999.00	-0.37	0.04	0.44
1999.25	-0.43	-0.02	0.38
1999.50	-0.43	-0.03	0.37
1999.75	-0.38	-0.02	0.34
2000.00	-0.35	0.01	0.37
2000.25	-0.54	-0.14	0.26
2000.50	-0.43	-0.08	0.26
2000.75	-0.39	-0.06	0.28
2001.00	-0.38	0.09	0.55
2001.25	-0.3	0.01	0.32
2001.50	-0.27	0	0.27
2001.75	-0.45	-0.19	0.07
2002.00	-0.57	-0.27	0.03
2002.25	-0.39	-0.13	0.13
2002.50	-0.43	-0.12	0.19
2002.75	-0.25	0	0.24
2003.00	-0.33	-0.1	0.14
2003.25	-0.25	0.02	0.29
2003.50	-0.23	0.05	0.32
2003.75	-0.14	0.2	0.54
2004.00	-0.1	0.25	0.61
2004.25	-0.07	0.3	0.68
2004.50	-0.15	0.23	0.61
2004.75	-0.31	0.11	0.53
2005.00	-0.67	-0.16	0.36

Source: Dynan, Elmendorf, and Sichel (2006a)
Note: 95th Percentile Confidence Interval Shown by Dashed Lines

Figure 7: Household Vulnerability to Economic Shocks
Lower Left Panel
Household Net Worth
Relative to Personal Income

Year	Ratio
1980	3.89
1981	3.81
1982	3.86
1983	3.85
1984	3.75
1985	3.95
1986	4.14
1987	4.1
1988	4.16
1989	4.25
1990	4.09
1991	4.24
1992	4.13
1993	4.23
1994	4.15
1995	4.42
1996	4.53
1997	4.77
1998	4.91
1999	5.26
2000	4.83
2001	4.62
2002	4.35
2003	4.71
2004	4.79
2005	4.9
2006	4.96

Source: Flow of Funds

Figure 7: Household Vulnerability to Economic Shocks
Lower Right Panel
Percentiles of NW/Y (Ratio)

Year	25th Pctile	50th Pctile	75th Pctile	90th Pctile
1981
1982
1983	0.33	1.55	3.9	8.14
1984
1985
1986
1987
1988
1989	0.32	1.72	4.67	9.77
1990
1991
1992	0.34	1.71	4.82	10
1993
1994
1995	0.46	1.69	4.88	10.35
1996
1997
1998	0.43	1.93	5.25	10.7
1999
2000
2001	0.46	2.04	5.81	12.32
2002
2003
2004	0.46	2.13	5.89	12.06
2005
2006

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Upper Left Panel
Households with Late Payments
High D/A (Share of Households)

Year	Above the 75th Percentile	Above the 90th Percentile
1988
1989	11.53	17.04
1990
1991
1992	9.97	14.58
1993
1994
1995	12.07	13.59
1996
1997
1998	13.27	18.41
1999
2000
2001	13.35	19.36
2002
2003
2004	15.91	24.08
2005
2006

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Upper Right Panel
Households with Late Payments
High D/Y (Share of Households)

Year	Above the 75th Percentile	Above the 90th Percentile
1988
1989	6.06	6.77
1990
1991
1992	6.49	9.6
1993
1994
1995	7.15	9.16
1996
1997
1998	8.62	9.38
1999
2000
2001	7.25	10.8
2002
2003
2004	7.86	10.56
2005
2006

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Middle Left Panel
Percentiles of D/A
Upper Half of Distribution (Ratio)

Year	50th pctile	75th pctile	90th pctile	95th pctile
1981
1982
1983	0.12	0.39	0.71	0.95
1984
1985
1986
1987
1988
1989	0.13	0.44	0.79	1.1
1990
1991
1992	0.15	0.47	0.81	1.23
1993
1994
1995	0.16	0.51	0.83	1.14
1996
1997
1998	0.17	0.51	0.87	1.35
1999
2000
2001	0.16	0.5	0.82	1.15
2002
2003
2004	0.21	0.55	0.88	1.27
2005
2006

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Middle Right Panel
Percentiles of NW/Y
Age of Head 30-39 (Ratio)

Year	25th pctile	50th pctile	75th pctile	90th pctile
1981
1982
1983	0.25	1.01	2.33	4.17
1984
1985
1986
1987
1988
1989	0.12	0.83	2	3.99
1990
1991
1992	0.16	0.79	2.07	4.1
1993
1994
1995	0.23	0.88	1.97	3.88
1996
1997
1998	0.17	0.91	2.24	5.02
1999
2000
2001	0.15	0.95	2.22	4.61
2002
2003
2004	0.22	0.92	2.19	4.38
2005
2006

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Lower Left Panel
Percentiles of NW/Y
Age of Head 40-49 (Ratio)

Year	25th pctile	50th pctile	75th pctile	90th pctile
1981
1982
1983	0.63	1.74	3.23	6.4
1984
1985
1986
1987
1988
1989	0.53	1.78	3.8	7.27
1990
1991
1992	0.52	1.49	3.26	5.95
1993
1994
1995	0.6	1.55	3.55	6.79
1996
1997
1998	0.63	1.82	3.79	7.22
1999
2000
2001	0.7	1.93	4.22	8.03
2002
2003
2004	0.66	2.05	4.17	7.28
2005
2006

Source: Survey of Consumer Finances

Figure 8: Financial Distress and the Adequacy of Retirement Savings
Lower Right Panel
Percentiles of NW/Y
Age of Head 50-59 (Ratio)

Year	25th pctile	50th pctile	75th pctile	90th pctile
1981
1982
1983	1.05	2.49	4.74	9.71
1984
1985
1986
1987
1988
1989	1.25	2.71	4.93	9.96
1990
1991
1992	0.9	2.85	5.76	10.44
1993
1994
1995	1.09	2.83	5.33	9.72
1996
1997
1998	0.97	2.88	6.12	11.3
1999
2000
2001	1.19	3.11	6.47	12.76
2002
2003
2004	1.06	3.24	6.84	13.3
2005
2006

Source: Survey of Consumer Finances

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Last update: August 19, 2007