Consumer debt passes $17 trillion

[nidena]

The total for borrowing across all categories hit $17.05 trillion, an increase of nearly $150 billion, or 0.9% during the January-to-March period, the New York Federal Reserve reported Monday. That took total indebtedness up about $2.9 trillion from the pre-Covid period ended in 2019.
That increase came even though new mortgage originations, including refinancings, totaled just $323.5 billion, the lowest level since the second quarter of 2014. The total was 35% lower than in the fourth quarter of 2022 and 62% below the same period a year ago.

Consumer debt passes $17 trillion for the first time despite slide in mortgage demand

[ripvanwinkle]

LOL...I'm responsible for about $8k of that.

[The Walk of the Penguin Mich]

So are we. It’ll get paid off when we get home next month and can move money around.

[Opti]

I'd be interested in CC debt stats. Did not see that in the article, but may have missed it. I did notice the below -

Student loan debt edged higher to $1.6 trillion and auto loans nudged up as well to $1.56 trillion.

Car costs have jumped dramatically since Covid 19 and tuition seems to keep climbing as well.
Some folks might be using CCs for rent, auto loans, and even food to get by. Plus since vacation season is starting soon
a fair amount of people may be spending money on vacations they did not do for the last 4 years.

[Opti]

Would like to copy this table, but its not working for me. 

Flow into Serious Delinquency (90 days or more delinquent)
CATEGORY1 Q1 2022 Q1 2023

MORTGAGE DEBT 0.34% 0.59%

HOME EQUITY LINE OF CREDIT 0.26% 0.48%

STUDENT LOAN DEBT 1.05% 0.94%

AUTO LOAN DEBT 1.61% 2.33%

CREDIT CARD DEBT 3.04% 4.57%

OTHER 2.88% 4.35%

ALL .071% 1.08%

www.newyorkfed.org/newsevents/news/research/2023/20230515

This is from the NY Fed on US consumer spending. I think they are looking at the wrong things as housing debt is a 60% of the population thing at best. Whereas auto loans and credit card debt cuts across most income levels. While neither auto loan debt nor credit card debt doubled in the 90 day deliquency category, the percentage is more worrying to me than housing. The process to repo a car or cut off someone's credit card limits is much faster than what happens with mortgages and evictions/foreclosures generally.

It shows me my suspicions are correct, the interest rate increases are stressing out consumers on the lower end and causing more to fall behind. Meanwhile the Fed is concentrated on housing because of the numbers in debt totals. Not smart IMO. (And yes I know I have no proof right this minute on who is in deliquency, but I've watched this before and my gut tells me I am right. As do the news stories about rents being raised and the unaffordability of vehicles for those making low incomes.)

[nidena]

May 16, 2023 8:52:00 GMT -5 Opti said:

<snip>

It shows me my suspicions are correct, the interest rate increases are stressing out consumers on the lower end and causing more to fall behind. Meanwhile the Fed is concentrated on housing because of the numbers in debt totals. Not smart IMO. (And yes I know I have no proof right this minute on who is in deliquency, but I've watched this before and my gut tells me I am right. As do the news stories about rents being raised and the unaffordability of vehicles for those making low incomes.)

From what I see on r/povertyfinance on reddit, that is absolutely correct.  Basic living line items got more expensive so folx had to use their CCs (more) and are seeing higher interest charges because of the Fed rate increases.  Now, their minimum payments are higher but they still have to use the CCs to cover basic living expenses.  Many are living in the same place they've been living for a few years but landlords have raised rents by as much as 50% and what used to be $600 in rent is now $900.

And folx wonder why there are more homeless...

[Opti]

My rent isn't that bad, but its way north of historical norms. I talked them down a percentage point for the renewal, so my increase last year was 10% and this year I signed the lease at a 5% increase. My affordable housing wait list spot has not manifested into an apartment offer yet.

Do hope to pursue cheaper options going forward because next year renewal lease time will be here soon enough and my goal is to be out and not enrich this landlord anymore than I need to. If you are making NYC money there are lots of new luxury apartments being built in every town around me. Affordable housing? Much harder and the leads times are crazy. 

[Tiny]

A popular standard for budgeting rent is to follow the 30% rule, where you spend a maximum of 30% of your monthly income before taxes (your gross income) on your rent. This has been a rule of thumb since 1981, when the government found that people who spent over 30% of their income on housing were "cost-burdened."

The 28% rule says you should keep your mortgage payment under 28% of your gross income (that's your income before taxes are taken out). For example, if you earn $7,000 per month before taxes, you could multiply $7,000 by . 28 to find that you should keep your mortgage payment under $1,960, according to this rule.

I think the mortgage rule of thumb is just for PI and doesn't include TI.
Renting can have a lot of "hidden" expenses - the need to use a laundra-mat or to have to pay for the use of a storage locker or off site storage.


For a 100K gross income (that's what the rule of thumb say) * .30 = 30,000 I assume that's divided by 12 = $2500.
For a 60K gross income * .30 = 18,000 divided by 12 = $1500.

Housing expenses can easily eat up one's take home pay...

[Opti]

May 21, 2023 10:54:50 GMT -5 Tiny said:

A popular standard for budgeting rent is to follow the 30% rule, where you spend a maximum of 30% of your monthly income before taxes (your gross income) on your rent. This has been a rule of thumb since 1981, when the government found that people who spent over 30% of their income on housing were "cost-burdened."

The 28% rule says you should keep your mortgage payment under 28% of your gross income (that's your income before taxes are taken out). For example, if you earn $7,000 per month before taxes, you could multiply $7,000 by . 28 to find that you should keep your mortgage payment under $1,960, according to this rule.

I think the mortgage rule of thumb is just for PI and doesn't include TI.
Renting can have a lot of "hidden" expenses - the need to use a laundra-mat or to have to pay for the use of a storage locker or off site storage.


For a 100K gross income (that's what the rule of thumb say) * .30 = 30,000 I assume that's divided by 12 = $2500.
For a 60K gross income * .30 = 18,000 divided by 12 = $1500.

Housing expenses can easily eat up one's take home pay...

I think  we should look more often at what the bottom 40% of earners are dealing with. NJ minimum wage just went up to $15/hr this January although there are exceptions like grocery stores, etc.

Minimum wage workers rarely get the opportunity to work 40 hours a week. They are more likely to be scheduled somewhere in the 35 to 37.5 hrs. a week range or even lower now that FT can be 30 hrs a week per law.

So 15x37.5x52 is $29,250 assuming one works the entire time or has some paid time off.
30% of gross is $8775 a year for housing. That isn't happening here unless you are already are in affordable housing, share with people or have a kind landlord situation where they rent out below market.

Affordable housing here often pegs up to 50% gross income because of the various categories - very low, low, and moderate income)

So 50% of that 29,250 is 14,625 or 1218.75 per month. Pre pandemic, in my part of central NJ you might have been able to find that. Now, good luck. Because of WFH and the proximity to NYC, rents have increased by double digits most places last year and depending on how well they chose only a 2% to say 8% increase this year. So if you were OK pre pandemic, you might be not OK post pandemic and you are competing with even more people for housing that is affordable.

[Opti]

Also to look at the bottom 40% wages and benefits differ greatly not just housing between various states.
Right now Indiana's minimum wage matches the federal minimum wage of  $7.25/hr.

There are plans o change it, however in this political climate, I think that is uncertain.

iga.in.gov/legislative/2022/bills/house/1333/

So, in Indiana at minimum wage similar calc we have -

7.25x37.5x52 for a yearly income of $14,137,50

30% is 4241.25 or 353.44/mo for rent
50% would be 7068.75 or 589/.06/mo for rent

Since its been more than 3 decades since I lived in Indiana, I'm going to guess in my old college town you are not renting a 1 bedrm for
353.50/mo. but maybe that $589/mo might work. You still have the issue though that some things are not that regional or don't vary enough. Food, car costs, medicine, etc.

I think this is why low cost of living areas may have persistent poverty more than some higher cost of living areas. The person in NJ has over double the amount of money to play with even if both people get housing at 50% of their income.

[nidena]

May 21, 2023 11:42:37 GMT -5 Opti said:

Also to look at the bottom 40% wages and benefits differ greatly not just housing between various states.
Right now Indiana's minimum wage matches the federal minimum wage of  $7.25/hr.

There are plans o change it, however in this political climate, I think that is uncertain.

iga.in.gov/legislative/2022/bills/house/1333/

So, in Indiana at minimum wage similar calc we have -

7.25x37.5x52 for a yearly income of $14,137,50

30% is 4241.25 or 353.44/mo for rent
50% would be 7068.75 or 589/.06/mo for rent

Since its been more than 3 decades since I lived in Indiana, I'm going to guess in my old college town you are not renting a 1 bedrm for
353.50/mo. but maybe that $589/mo might work. You still have the issue though that some things are not that regional or don't vary enough. Food, car costs, medicine, etc.

I think this is why low cost of living areas may have persistent poverty more than some higher cost of living areas. The person in NJ has over double the amount of money to play with even if both people get housing at 50% of their income.

In Indianapolis, that will get you the absolute shittiest apartment in the most neglected part of town.  I live in an area that is far from hoity toity and the starting rent for a 1 bedrm is $655/mo with the average closer to $800-$900/mo.  This area is also very car dependent in that there is only one bus route that comes through here...though, they're building a second one.

[Opti]

May 22, 2023 11:15:32 GMT -5 nidena said:

May 21, 2023 11:42:37 GMT -5 Opti said:

Also to look at the bottom 40% wages and benefits differ greatly not just housing between various states.
Right now Indiana's minimum wage matches the federal minimum wage of  $7.25/hr.

There are plans o change it, however in this political climate, I think that is uncertain.

iga.in.gov/legislative/2022/bills/house/1333/

So, in Indiana at minimum wage similar calc we have -

7.25x37.5x52 for a yearly income of $14,137,50

30% is 4241.25 or 353.44/mo for rent
50% would be 7068.75 or 589/.06/mo for rent

Since its been more than 3 decades since I lived in Indiana, I'm going to guess in my old college town you are not renting a 1 bedrm for
353.50/mo. but maybe that $589/mo might work. You still have the issue though that some things are not that regional or don't vary enough. Food, car costs, medicine, etc.

I think this is why low cost of living areas may have persistent poverty more than some higher cost of living areas. The person in NJ has over double the amount of money to play with even if both people get housing at 50% of their income.

In Indianapolis, that will get you the absolute shittiest apartment in the most neglected part of town.  I live in an area that is far from hoity toity and the starting rent for a 1 bedrm is $655/mo with the average closer to $800-$900/mo.  This area is also very car dependent in that there is only one bus route that comes through here...though, they're building a second one.

I was thinking more of West Lafayette or Bloomington, but I appreciate the update to info on Indy. I have college friends who live in Indy.