Household Riches

Steve Saretsky -

The sovereign debt bubble continues to expand, with Government debt around the world inching closer towards the $18 trillion dollar mark. With global central banks essentially nationalizing bond markets, investors continue to pile into alternative assets.

Of course housing has been one of the largest benefactors during this hunt for yield, and the pandemic has only compounded returns for homeowners. In fact, American homeowners are $1 trillion richer as the pandemic-driven housing boom pads their pockets. According to data from CoreLogic, in the past year, homeowners with mortgages, representing about 63% of all properties, have seen their equity increase by 10.8%. That equates to a collective $1 trillion in gained equity, or an average of $17,000 per homeowner, the largest equity gain in more than six years.

This gilded recession is not exclusive to the United States. North of the border, Canadian homeowners are also flourishing. According to third quarter data released this past week by Stats Canada, the nation’s households have seen their net worth jump by more than C$600 billion since the end of last year. Despite three million Canadians losing their job, a plunge in debt servicing costs and government support have pushed per capita household net worth to a record C$320,441 in the third quarter, up nearly C$12,000 since the end of last year.

Freshly printed loonies inflated the value of land and residential structures held by households by nearly $440 billion this year, the primary driver in the rise of household net worth.

Of course, this increase in net worth was padded through an increasing mountain of debt. Household debt to disposable income jumped to 170.7% on a seasonably adjusted basis in the third quarter, up from a revised 162.8%.

In other words, household riches hinge on the faith of global central bankers ability and desire to maintain the sovereign debt bubble. Here’s to $18 trillion and beyond.

Three Things I’m Watching:

1. Negative-yielding sovereign debt nearing $18 trillion.

2. On a per capita basis, Canada’s household net worth reached a record C$320,441 in the third quarter.

3. Despite rising household net worth, One-in-four Canadians are now suffering long-term unemployment.

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The Saretsky Report. December 2022