Some noteworthy stuff from the Q4 Flow of Funds

Every quarter, the Federal Reserve produces a "Flow of Funds" report. It contains all kinds of data on debt levels, debt growth, asset values, consumer net worth, and more. The latest one is big (the PDF link here leads to a 124-page document). Here are a few key points worth highlighting...

* Household net worth climbed to a record $55.6 trillion from $54.3 trillion in the previous quarter. That mostly reflected an increase in the value of stock and mutual fund holdings. Household real estate holdings rose a scant 0.9%

* Total debt outstanding (nonfinancial) grew at a seasonally adjusted annual rate of 7.9%. That was down from 9.4% a year earlier.

* Household debt growth dropped sharply to 6.6% from 11.6% a year earlier, driven by a big decline in mortgage debt growth (just 6.4% vs. 13.5% in Q4 2005). In fact, this was the slowest growth in mortgage debt since 1998.

* Corporate debt picked up the slack, surging 10.9%. That topped even the Q2 2000 growth pace of 10.3%. In fact, we haven't seen such a surge in corporate debt (on a full-year basis) since 1998 (+12.3%).

* State and local governments are binging away, too. Debt growth there jumped 13.5%, the most since Q4 2002.

* "Owners equity as a percentage of household real estate" continues to slump. The latest reading: Just 53.1%, down from 54.2% a year earlier.

This stat is computed by subtracting the value of home mortgages outstanding from the value of residential real estate, and then dividing the result by the value of residential real estate. Or in plain English, it's a rough measure of the percentage of their homes that Americans own (after any mortgage debt due).

Now 53% may not sound bad. But that includes the value of all homes with no mortgages. It's also the smallest equity position ever recorded in 55 years of record keeping (shown in the chart from Bloomberg above).

I find that astounding considering the gigantic surge in home values we've seen over the past few years. It means people have been "borrowing away" all that extra equity. Indeed, while the value of residential real estate holdings surged 49.8% between 2002 and Q4 2006, mortgage debt climbed even faster -- 62.1%.