August 13, 2019

Wall Street Journal Sounds Fake Alarm Over Mortgage Debt

The Wall Street Journal, in its persistent quest to mislead people about financial statistics, has this to say today:

U.S. Mortgage Debt Hits Record, Eclipsing 2008 Peak

U.S. mortgage debt reached a record in the second quarter, exceeding its 2008 peak as the financial crisis unfolded. Mortgage balances rose by $162 billion in the second quarter to $9.406 trillion, surpassing the high of $9.294 trillion in the third quarter of 2008, the Federal Reserve Bank of New York said Tuesday….The figures are nominal, meaning they aren’t adjusted for inflation.

Nominal, you say? How about if we go ahead and correct for inflation, just for laughs? In fact, let’s take the advice of Diane Swonk, chief economist at Grant Thornton, who told the Journal, “What’s more interesting is when you look at the service burden, we don’t have more debt.” Here it is:

That sure doesn’t look like a new record, does it? It’s true that much of this decline is due to low interest rates, which can always change. But there’s sure no hint of that on the horizon. The Fed just lowered policy rates and certainly shows no inclination to raise them anytime soon.

The fact that some government agency reports a number that happens to be higher than some previous number is not necessarily a good hook for a story—and it’s definitely not a good reason for a big headline that screams “mortgage debt hits record.” At the absolute least, you need to correct a time series like this for inflation, and at best you need to present it in a way that actually makes sense. Percentage of income is usually the most sensible way to present debt.

But if you did that you wouldn’t have a story. Can’t have that, I guess.

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