In Q1 2024, U.S. household debt reached a record $17.69 trillion, accompanied by rising delinquency rates and growing financial strain among consumers.
In the first quarter of 2024, U.S. households have encountered increased financial strain as confirmed by the latest data from the Federal Reserve Bank of New York. Total household debt has surged by $184 billion, reaching a new high of $17.69 trillion. This rise is accompanied by higher delinquency rates, indicating that consumers are struggling to keep up with their debt payments.
The Quarterly Report on Household Debt and Credit revealed that mortgage debt rose significantly by $190 billion, now totaling $12.442 trillion. Concurrently, home equity lines of credit (HELOC) balances have increased for the eighth consecutive quarter, reaching $376 billion. Notably, the flow into serious delinquency for mortgage debt has escalated to 0.92 percent from 0.59 percent in the previous year.
While credit card debt decreased by $14 billion to $1.115 trillion, it remains 13 percent higher than the same period last year. Credit card delinquencies have jumped to nearly 7 percent, marking a substantial increase. Ted Rossman, a senior industry analyst at Bankrate, highlighted the unusual growth in credit card balances, stating, "Americans typically engage in a post-holiday financial detox in Q1... But credit card balances usually rise in the second and third quarters and then they really tend to spike around the holidays in Q4."
Auto loan debt also experienced an increase of $9 billion, reaching $1.616 trillion, with serious delinquency rates marginally rising to 2.78 percent. The report indicates a troubling trend with close to 9 percent of credit card balances and nearly 8 percent of auto loans transitioning into delinquency.
The New York Fed's monthly Survey of Consumer Expectations reflects growing concerns among U.S. households, with over one-third reporting their financial situation has worsened compared to last year. Income growth expectations have diminished, and the mean probability of failing to make a minimum debt payment remains at a high level since May 2020.
The economic outlook is further dampened by the declining University of Michigan Consumer Sentiment Index, which has hit a six-month low. Joanne Hsu, the director of Surveys of Consumers, cites inflation, interest rates, and unfavorable economic trends as major sources of consumer worry.
Major corporations, including Starbucks and McDonald’s, are noticing a shift in consumer behavior as people become more frugal. Jay Woods, chief global strategist at Freedom Capital Markets, anticipates a dip in retail sales, suggesting consumers are adjusting their spending in light of inflationary pressures.
