The State of Consumer Debt in America, 2019

How does the old proverb go? Those who don’t study the past are doomed to repeat it?

We’re about ten years out from the beginning of the global economic downturn now known as the Great Recession. This major recession impacted just about every facet of the American economy, and its effects are still being felt today in the housing, retail, and credit industries.

In many ways, the economy has bounced back. But there are still warning signs out there that we aren’t totally out of the woods, and another slowdown could come.

When looking towards the future health of the economy, one important place to look is at debt statistics. Getting a sense of where consumer debts and household debts stand can help you understand the past, present, and future of the American economy. Let’s dive in:  

Some Key Debt Statistics to Know in 2019

We’re writing this blog in spring 2019, so it’s important to keep in mind that things could be different by the time you read it! The economy is always changing, and there may be more up-to-the-minute stats out there.

For our purposes, we’re going to look back, to the end of 2018 and beginning of 2019. Here’s a quick snapshot of where some key debt metrics stood, in eight key figures:

  1. Consumer debt in the US is rising. Total outstanding consumer debt totaled $4.01 trillion as of December 2018, according to data from the Federal Reserve Board. This is up from 2017 (when outstanding debt totaled about $3.8 trillion), which, in turn, was up from 2016 ($3.6 trillion).
  2. Household debt in the US is rising, as well. According to data from NerdWallet, total household debt (including mortgages) owed in the US totaled about $13.51 trillion as of late 2018. Per NerdWallet, the average US household owes about $135,768 in debts.
  3. The most common categories of debt affecting households are credit card debt, mortgages, auto loans, and student loans, per NerdWallet.
  4. Credit card debt totaled debt totaled $1.045 trillion as of late 2018, per information from The Balance. According to NerdWallet, the average household with credit card debt will pay roughly $1,141 in interest per year.
  5. As of mid-2018, the growth in debt was slower than it was before the housing crisis/Great Recession, according to a report from Quartz.
  6. In the housing market? As Quartz notes, “the proportion of serious mortgage delinquencies is falling,” and the median credit score for new mortgages has been rising, significantly lowering the rate of subprime mortgages. On the flip side, Quartz reports that “auto loan delinquencies have been rising since 2012,” and “19% of new auto loans were issued with credit scores below 620.”
  7. Income is rising, but it may not be enough to keep up with expenses – which could lead to new debts. As NerdWallet reports, US median income has grown 22% since 2008. Meanwhile, cost of living has increased a projected 17%. Other key costs have also grown more expensive, including medical costs (up 33% since 2008) and food costs (up 27%). According to a Harvard study, reported by Huffington Post, medical expenses accounted for approximately 62% of personal bankruptcies as of 2015.
  8. As we’ve noted previously, nearly 13 million consumer bankruptcy petitions were filed in the federal courts between 2005 and 2017. However, according to a report from U.S. Courts, the total number of bankruptcy filings is declining, and was down about 1.8% between March 2017 and 2018.

The Takeaways: What to Watch

So, what is there to glean from all that information? For one thing, it reveals a few key areas of consumer debt to watch in the months and years ahead. Auto loans, for instance, may be a key metric to keep an eye on, given how many more are being, and how quickly the delinquency rate is rising.

Student loan debt is also going to prove important. With more than 44 million Americans facing student loan debt, it’s one of the biggest economic factors influencing the millennial generation, who now make up the largest share of potential homebuyers and economic actors in the economy – in theory.

Why that stipulation? Well, all of the research we’ve pulled together suggests that millennials are in a peculiar position in the national economy, given that they were largely just coming of age during the financial crisis a decade ago. A report from American Banker suggests that “many millennials have resigned themselves to delaying major purchases that previous generations made at younger ages.”

As the AB report notes:

“Young adults often are still trying to pay off their student loans, and many of them are living for longer periods in cities, where car ownership may be optional. Meanwhile, mortgage standards have tightened, and home prices are soaring in many parts of the country.

A 2017 survey by TransUnion found that 74% of millennials who did not already have a mortgage planned to buy a home eventually.

‘A set of specific circumstances has resulted in a generation that has postponed the typical milestones of adulthood — job, home, marriage, children — and all the purchases that go along with them,’ said a TransUnion report on millennials.”

Data from Quartz backs up this notion. Their reporting indicates that the homeownership rate for Americans under 35 was 35% as of 2018 – compared with 43% prior to the Great Recession. For those over 65, however, homeownership rates have held steady, right around 80%.

In that same vein, American Banker’s research indicates that millennials use fewer credit cards than other demographics. They cite a 2015 survey revealing that only 61% of millennials reported having at least one credit card, compared to 79% of Gen X and 89% of baby boomers.

As Quartz sums it up:

“Although American households, in the aggregate, appear able to withstand a financial shock thanks to rising wealth and less worrying types of indebtedness, the details reveal that this is mostly true for older borrowers with higher credit scores.”

In other words? While there aren’t necessarily imminent signs that the sky is about to fall, it’s key to be vigilant, particularly, perhaps, for the millennial generation. As the global economy undergoes changes of its own, the Fed continues to raise rates, and Americans continue to build debt, there may come a time when consumers can’t keep up with their payments, which could well lead to another major economic downturn. It may pay to plan ahead, keep an eye on the economy, and devise a wealth protection strategy now, before a crisis has time to develop.

Debt, Bankruptcy, Real Estate – They’re More Than Just Numbers

Getting a handle on all this data is one thing, but it’s something else entirely putting this knowledge into practice as a sound strategy when it comes to debt relief, bankruptcy, or real estate. If you’re looking for a Chicagoland law firm that understands the human side beneath the neverending deluge of statistics and figures, the Gunderson Law Firm would be happy to help.

Our team of attorneys and staff are experienced and knowledgeable in the many elements that go into real estate and bankruptcy law for Chicagoland residents and beyond. Our professionals possess unparalleled expertise and insight, bolstered by years of experience and valuable connections with many of the top real estate and financial professionals in Illinois.

Above all else, we are committed to providing the advocacy you need without the attitude you don’t. If you have found other lawyers to be more about their egos than about your case, talk to Gunderson Law Firm. Our attorneys are not only highly knowledgeable and experienced, but very down-to-earth. We’re all about great representation and timely results, tailored to your unique circumstances.

Let our experts guide you through the legal process with ease! Drop us a line whenever you’re ready to keep the conversation going.

2019-03-18T15:49:28-05:00 March 26th, 2019|Community|