Household Debt, Net Worth on the Rise -- What Does It Mean?

NEW YORK (TheStreet) -- The great deleveraging may be coming to an end.

Household debt is on the rise after six years of decline, according to last Thursday's quarterly Fed release of the Financial Accounts of the United States (formerly the Flow of Funds Accounts). Plus, household net worth continues its five-year climb.

The Federal Reserve Bank of New York illustrated this change in debt in the chart below. Click on the image for a link to the original source.

The fourth quarter 2.1% debt growth yielded a 1.6% year-over-year increase for 2013, the first such increase since the third quarter of 2008. This reflects two quarters of increased borrowing: Q3 and Q4 of 2013.

Debt has declined in almost every quarter since the fourth quarter of 2008, and 2013's fourth quarter increase is the largest since the fourth quarter of 2007.

The Fed reports:

"Mortgages, the largest component of household debt, increased 1.9% during the fourth quarter of 2013. Mortgage balances shown on consumer credit reports stand at $8.05 trillion, up by $152 billion from their level in the third quarter. Furthermore, calendar year 2013 saw a net increase of $16 billion in mortgage balances, ending the four year streak of year over year declines."

"Nonetheless, overall consumer debt remains 9.1% below its 2008 Q3 peak of $12.68 trillion."

Meanwhile household net worth rose 3.8% in the fourth quarter, for a 13.8% year-over-year increase.

The economic implications of these increases are unclear. Rising household debt could signal increased consumer confidence and willingness to spend, but it could also indicate an increased need to borrow to maintain spending levels in face of anemic personal-income growth.

Likewise, the net-worth increase has ambiguous implications.

Of the $9.8 trillion rise in 2013, 86% resulted from market-price-driven capital gains on assets, rather than income and saving. Those holdings and gains are heavily concentrated among 20% of the population, muting the potential "wealth effect" on real-economy spending, investment, production, and growth.

Steve Roth an investor and serial entrepreneur in Seattle. He blogs at

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.