US household debt now over $18 trillion
https://www.newyorkfed.org/newsevents/news/research/2025/20250213
Sinking under debt!
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Delinquency rates on Federal Housing Administration and Veterans Affairs loans reached 11.03% and 4.7%, respectively, at the end of last year, according to the Mortgage Bankers Association, breaching pre-pandemic levels.
The share of outstanding US consumer debt that’s in delinquency rose in the fourth quarter to the highest in almost five years, according to a Federal Reserve Bank of New York report.
Some 3.6% of debt was delinquent in the final three months of 2024, the most since the second quarter of 2020, the New York Fed said Thursday in its Quarterly Report on Household Debt and Credit. Total household debt — which is primarily composed of mortgages, student loans, auto loans and credit-card balances — rose 0.5% to a record $18 trillion.
The report suggests Americans are increasingly struggling financially as they face a third year of elevated interest rates imposed by the US central bank in its campaign to bring inflation down.
Credit-card balances registered the fastest increase in the fourth quarter, rising 3.9%.
Is the US consumer tapped out?
Interest rates won’t be declining soon.
Prices on goods will increase as tariff war begins in earnest.
On the cusp of recession?
“The main problem is that since January 2020, everything you and I buy on average is up 25%,” Apollo Global Management chief economist Torsten Sløk told Yahoo Finance Executive Editor Brian Sozzi
Sløk notes that while inflation can slow (it is currently around 3%, down from 9% growth), “you basically never see the price level go down. It is expensive at the moment, but on average, it is almost never the case that we see the price level in aggregate come down.”
Consumption slows which means profits slow which means GDP slows.
A full-fledged trade war will likely weigh on export demand and overseas profits of multinational firms. At home, inflation remains sticky and the Federal Reserve appears in no rush to cut interest rates.
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More relevant than household debt as a percentage of GDP is Consumer Debt Service Payments as a percent of disposable personal income. This has been rising.
Wendy
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But it is still lower than pre-pandemic levels.
Probably. We haven’t had a real (business cycle induced) recession since 2010 or so. That’s 15 years. There are people that believe that the fed combined with congress have “cured” recessions forever. But I don’t believe that.