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Comment by simon_ | Hacker News Reader

This has to be mostly mortgages, which makes it a little misleading.

More than a little. And I didn't think consumer debt included debt used for investments like a mortgage, so it seems like this is just a case of wolfram alpha not interpreting a query correctly.

Why is it misleading?

Generally, mortgages are an amount less than an asset someone has. It would be kind of absurd to consider a person with a $500k house and $50k in outstanding mortgage to be worse off than a person with $0. Mortgages also generally (depending on the state) are non-recourse; if your mortgage is for more than the property is worth, you can hand in your keys and walk off with no additional liability.

I agree from a cashflow perspective, a mortgage even if you have substantial equity can be bad, but most people don't get into debt trouble from mortgages, unless they got some kind of absurd mortgages for close to the value of the property, resetting ARMs, and fundamentally have more house than they otherwise would have purchased. True, a lot of people did this, but it's a historical anomaly.

But I'm sure you knew all that and were just trying to make a point :)

So it's misleading because they listed debt rather than net worth? I'm not sure "misleading" is the right term - I'd use "a correct number, properly labelled, but which answers a different question than the question rdl wants answered".

Incidentally, I'm not sure why mortgage debt is more misleading than other debt. If I have $500k in the bank but owe $50k on an auto loan or credit card, is that somehow worse than owning a $500k house with $50k mortgage debt?

As for the call-option nature of loans, that only applies in a few states (admittedly including CA and TX), and only to some loans (mostly only the first loan). While you are probably right that some mortgages should be excluded for this reason, I'd be surprised if they were the majority.

The reason mortgage debt is better is because the asset borrowed tends to appreciate (although obviously not in the past 5 years) whereas with a car loan or credit card the asset(s) depreciate quite rapidly, on top of the fact that the interest is much higher and not tax deductible.

A mortgage is also potential equity whereas your credit card debt is not. I'm going to pay to live somewhere (rent or mortgage). If I have mortgage debt, that 'rent' payment is becoming ownership. In addition, the interest on that debt is deductible so, to some degree, it comes out in the wash (so to speak).

This says consumer debt, which I assume excludes mortgages, right?

by definition, mortgage is still a debt

Yes, but it's a special kind of debt. There's a reason why you pay 25% interest on credit cards and 4% on your house.

Mortgage debt is secured.

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