The Evolution of Household Leverage During the Recovery

Recent research has shown that geographic areas that experienced greater household deleveraging during the recession also experienced relatively severe economic contractions and slower recoveries. This analysis explores geographic variations in household debt over the past recession and recovery. It fi nds that regions that had very high household leverage at the start of the recession have shifted back toward national norms, while the variation of leverage within metro areas has maintained steady relationships with neighborhood characteristics such as location, demographics, and the age of the housing stock. ISSN 0428-1276 The run-up to the most recent recession was characterized by a large increase in household debt, especially mortgage debt. Household debt began falling during the recession, and this deleveraging continued for four years after the economy resumed growing. Recent research has shown that the degree of deleveraging that occurred in different geographic areas is associated with the severity of the recession and the pace of recovery in those areas (Mia