The Consumer's Least Elastic Expenditures

Data from the Federal Reserve shows that debt service ratios have declined into the end of 2009. 

Debt service ratio looks at debt payments to disposable personal income while the financial obligation ratio includes other obligatory payments such as property tax, automobile leases, rental payments and homeowner’s insurance. These ratios peaked in the first quarter of 2008 and have each dropped about 1.3%.

Looking specifically at homeowners, the drop from 2008 is seen to have been driven equally by both consumer and household related payments.  However, it can be argued that mortgage debt has more to fall before it reaches historical averages.

Interestingly enough, the financial obligation ratio of renters is lower than its historical averages. This is probably due to selection bias, as many people with a predisposition for borrowing money figured out that becoming homeowners was the easiest way to access more debt. The higher average financial obligation ratio of renters can be explained by renters earning less because they are younger than homeowners and because a sizable fraction of homeowners don’t have any mortgage to pay while all renters have to pay rent.