Total household debt has jumped 1.4% to $14.56 trillion during the fourth quarter of 2020, in large part due to the steep uptick in mortgage loans as Americans participated in the booming housing market.

The total debt balance is $414 billion higher than at the end of 2019 and $206 billion higher than at the end of the third quarter, according to the New York Federal Reserve. Mortgage originations, including refinances, reached a record high of $1.2 trillion for the fourth quarter as Americans took advantage of low mortgage rates and stimulus. 

Mortgage balances shown on consumer credit reports surpassed $10 trillion in Q4’20 and represented a $182 billion increase from the previous quarter. The increase came as the U.S. closed out a year in which Americans sought out larger living spaces as they adopted work-from-home policies amid the coronavirus pandemic. Existing-home sales for 2020 increased 22.2% year-over-year, reaching their highest level since 2006, according to the National Association of Realtors.

Consumer Spending Lags Behind

Meanwhile, credit card debt also increased in the fourth quarter by $12 billion to $820 billion, though it is still $108 billion lower than it had been at the end of 2019. This marks the largest yearly decline since 1999, consistent with continued weakness in consumer spending as well as paydowns by card holders.  

U.S. households cut spending in December for the second consecutive month, during a season that is typically characterized by its robust holiday shopping and mega sales. Personal consumption expenditures (PCE) decreased by $27.9 billion, or 0.2%, according to the Bureau of Economic Analysis. 

However, consumer spending is reaching a turning point as U.S. retail sales have increased in January for the first time since September, in a welcome sign that the U.S. economy is slowly recovering from the coronavirus pandemic in the new year. U.S. retail and food services sales were $568.2 billion in January, up 5.3% from December's $539.7 billion and 7.4% above Jan. 2020's $528.9 billion, the U.S. Census Bureau reported.

Auto and student loan balances increased by $14 billion and $9 billion, respectively.