US Household Debt Soars to $17.7 Trillion in 1st Quarter: New York Fed Data

Alain Filiz shows off some of his credit cards as he pays for items at Lorenzo's Italian Market in Miami, Fla., on May 20, 2009. Joe Raedle/Getty Images

Stressed U.S. households “faced worsening financial distress” to kick off 2024 as they endured a blend of higher inflation and rising interest rates, according to Federal Reserve Bank of New York economists.

New data from the regional central bank’s Quarterly Report on Household Debt and Credit showed that total U.S. household debt surged by $184 billion to $17.69 trillion in the first quarter, with borrowers facing higher delinquency rates.

Aggregate delinquency rates advanced in the first three months of 2024, with 3.2 percent of outstanding debt in some stage of delinquency, up from 3.1 percent in the final quarter of 2023.

Mortgage debt increased $190 billion from the previous quarter to $12.442 trillion. Home equity lines of credit (HELOC) balances swelled by $16 billion to $376 billion, rising for the eighth consecutive quarter.

The flow into serious delinquency (90 days or more) for mortgage debt rose to 0.92 percent, up from 0.59 percent in the first quarter of 2023. HELOC delinquencies were little changed at 0.52 percent.

Credit card debt fell $14 billion to $1.115 trillion, though it was up more than 13 percent from a year ago. Additionally, credit delinquencies surged to nearly 7 percent, up from 4.57 percent in the January to March span.

According to Ted Rossman, a senior industry analyst at Bankrate, credit card balances have never climbed from the fourth quarter of one year to the first quarter of the following year since the New York Fed launched this series in 2003.

“Americans typically engage in a post-holiday financial detox in Q1. They spend less and use tax refund money to pay down debt, emboldened by New Year’s resolutions,” Mr. Rossman said in a statement. “But credit card balances usually rise in the second and third quarters and then they really tend to spike around the holidays in Q4.”

That said, there is a high chance that credit card balances are likely to increase to fresh highs later this year, he noted.

Auto debt rose $9 billion to $1.616 trillion, while serious auto loan delinquencies edged up to 2.78 percent.

On an annualized basis, close to 9 percent of credit card balances and nearly 8 percent of auto loans transitioned into delinquency.

Maxed-out credit card users, represented mainly by younger borrowers and those living in low-income areas, are witnessing greater delinquency.

An auto dealership in Queens, New York, on May 2. Auto loans, dubbed the new subprime, are the fastest-growing category of consumer debt. Spencer Platt/Getty Images

Meanwhile, student loan debt shed $6 billion to $1.595 trillion, and the serious delinquency rate tumbled to 0.8 percent from 0.94 percent. The decline was fueled by the current administration’s forgiveness of billions of dollars in student debt.

State of Household Finances

More than one-third (36.5 percent) of U.S. households say their financial situation is “somewhat worse off” or “much worse off” compared to a year ago, according to the New York Fed’s monthly Survey of Consumer Expectations. This is up from 33.5 percent in March.

Looking ahead to a year from now, approximately one quarter (24 percent) think they will be worse off, little changed from the previous month.

Household income growth expectations fell to 3 percent in April, while household spending growth projections jumped to 5.2 percent, according to the New York Fed’s monthly Survey of Consumer Expectations.

The mean probability of not being able to make a minimum debt payment over the next three months was unchanged at 12.9 percent, the highest level since May 2020.

With average credit card interest rates nearing 22 percent, consumers are finding it harder to keep up.

Current economic conditions have seen consumers erase their growing optimism that had been observed since the end of last year.

The widely watched University of Michigan Consumer Sentiment Index plunged to a six-month low in April.

Joanne Hsu, the Surveys of Consumers director, noted that respondents expressed concern over inflation, interest rates, and inflation “moving in an unfavorable direction in the year ahead.”

One-year-ahead inflation expectations jumped to 3.5 percent last month, up from 3.2 percent.

Major companies, from Starbucks to McDonald’s, have warned that consumers are beginning to pull back as they become more cost-conscious and price-sensitive amid easing income growth and inflationary pressures.

“Retail sales numbers are expected to decrease thanks to a drop in average income growth. We are starting to see a more cautious consumer,” said Jay Woods, the chief global strategist at Freedom Capital Markets. “This week, we should see a clearer picture of how the consumer is modifying their spending habits due to inflation pressures.”

The annual inflation rate is expected to be unchanged at 3.5 percent, and retail sales are projected to rise 0.4 percent.