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Great Recession’s Impact Lingers in Hardest-Hit Regions

“The New York Fed’s Center for Microeconomic Data today released our Quarterly Report on Household Debt and Credit for the fourth quarter of 2017. Along with this report, we have posted an update of state-level data on balances and delinquencies for 2017. Overall aggregate debt balances increased again, with growth in all types of balances except for home equity lines of credit. In our post on the first quarter of 2017 we reported that overall balances had surpassed their peak set in the third quarter of 2008—the result of a slow but steady climb from several years of sharp deleveraging during the Great Recession.  Notably, however, mortgage balances remain 4.4 percent below their previous peak in nominal terms. The data also reveal considerable regional heterogeneity. Some regions of the country have long surpassed their earlier peak, while the areas hit hardest during the Great Recession—those with the largest home price declines and highest foreclosure rates—have aggregate mortgage balances far below their previous peaks, even as home prices have largely recovered. The Quarterly Report, state data, and this analysis are all based on the New York Fed’s Consumer Credit Panel, which is based on Equifax credit report data.  Mortgages are the largest form of household debt and have historically dominated the liability side of the household balance sheet. The map below depicts the percent change in aggregate mortgage balances by state since their peak in the third quarter of 2008. Although for the country as a whole mortgage balances remain slightly below their 2008:Q3 peak, on the state level the change in mortgage balances has been very mixed. Some states such as Texas, North Dakota, and Delaware, shown in dark blue below, have balances more than 10 percent above their previous peak. There are eight states with balances still at least 10 percent below their earlier peak. Most of these states—among them, Florida, Arizona, Nevada, and California—were severely impacted during the Great Recession.”

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