Unrecognized Unsecured Debt

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As the chart illustrates, U.S. home ownership is back to the 1980's levels and unreported debt is growing (table below chart).

This is what happens when debt levels outpace earning capabilities. The stress of watching one's equity evaporate leads many consumers to lose track of obligations when reporting.

If debt levels are under reported in the U.S. it's probably similar in Canada as well. James Fitz-Morris examines debt-to-income levels for the average Canadian family in the video below.

The bubbly asset levels in Canada represent a huge risk because without price appreciation, debt repayment becomes an occupation.

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Do We Know What We Owe? Consumer Debt as Reported by Borrowers and Lenders

From the 44 page study via Barry Ritholtz

• Economists' understanding of the finances of U.S. consumers is based heavily on survey data, and on the Survey of Consumer Finances (SCF) in particular. However, recent research calls into question survey respondents' willingness and ability to report their debts accurately.
• This study compares U.S. household debt as reported by borrowers to the SCF with debt reported by lenders to Equifax using the FRBNY Consumer Credit Panel (CCP). Debt levels, distributions, and trends are compared by loan type, both in aggregate form and for age, region, and household-size subsamples.
• Our most striking finding is that, overall and in most disaggregated debt categories, debt levels reported in the SCF and CCP are quite similar. Even bankruptcy measures correspond well.
• The exceptions lie in the unsecured debts. Under our most inclusive assumptions, SCF-implied aggregate credit card debt is 37 percent lower than that implied by the CCP, and SCF-implied aggregate student debt is 25 percent lower.

Canada's Sky-Rocketing Household Debt 1990 vs 2015

CBC's James Fitz-Morris examines debt-to-income levels
for the average Canadian family; September 13, 2015

DATA CITED IN THIS VIDEO

AVERAGE
Debt to Income
Income
House Price
Equity to Debt

1990
89%
$45,000/yr
$147,000
17.8%

2015
165%
$73,000/yr
$450,000
18.2%

CHANGE
+76%
+62%
+206%
+2%