Three comments: First, we're making good progress. Mortgage debt to GDP has been falling by roughly 1% per quarter. At this rate we'll be back to normal in four years. Second, interest rates, and hence mortgage payments, are far lower today than they were in the mid 1990's. Back then mortgage rates were around 8%. Today they're below 4%. Mortgage debt servicing payments as a percentage of DPI is at 9.18% as of Q1 2012, its lowest level since Q2 2002. The low over the past 30 years was 8.67% in Q1 2000, and it's likely that by the second half of this year household mortgage burdens will be at a 30-year low. And third, just as it's not helpful to think about a "national average temperature," if you want to know the weather forecast, the breakdown of homeownership -- and hence mortgage debt responsibility -- matters.

For instance, while the overall homeownership rate at 66.1% is above the 64% it was at during the late 1980s and early 1990s, for all of the age buckets between ages 35 and 50, homeownership rates are already at 30-year lows (see Table 17).

The overall homeownership rate looks like it still has room to fall because, 1) baby boomers, especially the older ones, never sold their houses - the homeownership rate for those age 55-64 is at 78.5%, and has averaged roughly 80% since the 1980s, and 2) as the population ages, and given that older people have higher homeownership rates than younger people, the overall homeownership rate rises.

OK, so the homeownership rate of people age 35-49 is at multi-decade lows. Why does this matter? Because young homebuyers power the US economy.

Between 1982 and 2001 the number of homeowners ages 35-49 increased by almost 10 million, or 60% (see Table 12). Baby boomers were hitting their prime household-formation years and buying houses. Since that time age 35-49 households have decreased their homeownership by over 4 million houses - baby boomers aged and moved out of those age buckets, and because of economic uncertainty and its smaller size, Gen-X wasn't able to keep up (note: there was a big multi-year revision in 2002 that distorts these numbers a bit).

But here's reason for optimism. Millennials are now coming of age, as seen in the following chart - number of households by age. In 2011 we saw the biggest spike in households age 30-34 that we've ever seen. Household formation leads to homebuying. David Crowe of the NAHB said that 2 million new households were not formed because people moved back in with roommates or parents - in the chart below, you can see how the number of households ages 35-44 shrunk significantly over the past few years - those people are still here. This is classic pent-up demand.

So let me tell my version of the 1982-2012 US economic story.

Beginning in the early 1980s the baby boomer generation, the largest in history, started hitting its mid-late 30s and bought houses at a normal rate. But even a normal rate for a big class meant a lot of house purchases and economic growth. Inflation and interest rates began a 30-year decline, fueling asset prices and household wealth.