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Indicator: Debt to Income Ratio
- Upstream Indicators
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Income Distribution --- In the two decades between 1979 and 2007, income has shifted from the four lower income groups to the highest income group. (view data graph)
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- Downstream Indicators
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There are currently no published Downstream Indicators.
Sustainability Snapshot:
Spending more than we earn is, almost by definition, unsustainable. Yet more and more individuals and households are doing just that. We're saving increasingly less and paying increasingly more for debt relative to our incomes. From a personal perspective, our debt-to-income ratio is a critical measure for access to credit, particularly home loans. Lenders want to make sure a mortgage applicant is able to consistently pay their new mortgage. From a broader perspective, tracking debt-to-income ratios of Puget Sound residents and any disparities by race/ethnicity provides an overall indication of the economic health of the region, the financial sustainability of the region's households, as well as the success of efforts to eliminate racial/ethnic disparities in access to employment, education, and other economic opportunities.
Sustainability Trend:
According to Federal Reserve Board statistics, the ratio of household debt to disposable income in the U.S. rose from approximately 100 percent in March 2001 to well over 120 percent towards the end of 2005. Debt has expanded by 30.3 percentage points to 108.4 percent of income – the first time since the Federal Reserve started conducting consumer finance surveys that debt exceeded income. Despite low interest rates, debt payments surged to new highs. In 2004, the typical family spent more than 18 percent of its income on debt payments – the largest share since the Federal Reserve started collecting these data. The share of heavily indebted households continues to rise. The share of households with debt payments greater than 40 percent of income rose from 12.8 percent in 2001 to 13.7 percent in 2004. From: Drowning in Debt: America’s Middle Class Falls Deeper in Debt as Income Growth Slows and Costs Climb
Data Discussion
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