Americans took on $1.02 trillion in new debt last year, thanks to homes and cars

U.S. household debt increased $1.02 trillion last year, the most since a $1.06 trillion rise in 2007, The Wall Street Journal reported Tuesday.

Total consumer debt is now hovering around $15.6 trillion, versus $14.6 trillion a year ago.

The jump "is largely a function of a sharp rise in prices for homes and cars," the Journal writes. For example, the price of the average U.S. home rose almost 20 percent in 2021, while "rising prices for new and used cars drove auto-loan originations to a record $734 billion."

The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.

Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.

Sign up

That said, the increase in borrowing is not something of concern, economists for the Federal Reserve Bank of New York said. "Wealth increased across all income levels during the pandemic" and "delinquency levels on consumer loans are still hovering around record lows," the Journal notes.

As an added benefit, "some 87 percent of the new debt is tied to homes that can appreciate over time, allowing borrowers to build wealth," the Journal writes.

The news arrives as the Federal Reserve appears poised to raise interest rates to combat rampant inflation, CNBC notes.