Household debt to GDP is around at a multi-decade low [1]. Payments as a fraction of disposable income, similarly low [2]. Total debt is rising [3]. But non-housing debt rose 5.8% from Q2 2022 to the same quarter '23; that's about inflation.
[1] https://fred.stlouisfed.org/series/HDTGPDUSQ163N
It's a fantastic metric to compare aggregate debt to. It isn't the end of the story, which is why I also cited debt payments to disposable income.
American households are not, in aggregate, in a painful or even deteriorating position with respect to their debt. That doesn't mean many households, or even entire regions, e.g. West [1], aren't in pain.
[1] https://usafacts.org/articles/the-state-of-household-debt-in...
The US has free healthcare for the bottom ~25%, including the poor. If you are in the low income working group, you're often largely out of luck. Those are the people suffering the most. They often don't qualify for EBT cards, they don't qualify for free healthcare, they don't qualify for housing subsidies, and so on.
“Free healthcare” in the form of Medicaid is a bit generous of a description for people under 65 and over 18. Few providers take it, and the benefits are really bad in many places.
So the metric to measure “working class burden” (or whatever) is the percent increase in consumer, non-housing debt for people who had debt.
Well off people who went from $0 credit card debt to $0 while having their networth double since 2020 (high gdp) are not very useful to predict bankruptcy or political upheaval like people who went from $5k to $40k in credit card debt, are renting so didn’t see their networth go up and had their wages increase 5-10%. Those people are having a really rough time. And are worse off now day to day, and have increased exposure to risky negative events.
Me, I use the credit card as a 6 week interest-free loan, plus getting the cash back discount.
> Credit utilization rates (for revolving accounts). Computed as proportion of available credit in use (outstanding balance divided by credit limit), and for reasons discussed above are likely to overestimate actual credit utilization.
0: https://www.newyorkfed.org/medialibrary/interactives/househo...
For me, I charge and pay every month so never pay interest. But my credit report always shows a 2-5k balance (or whatever I charged).
Theoretically, if I paid off the balance BEFORE my statement period ends it would show $0, but I never do this because I have 25 days of 0% interest to pay, so I do.
I don’t think credit reports track interest paid but that would be one way to track if it’s “real” credit card debt or people just cycling.
But also you could look at average. I average $3k over the past 10-30 years or whatever. If this increased to some new stable level it would mean an increase in income. But if it increased at some rate or increased sporadically then it means I’m taking on more debt.
So I expect if credit card debt increases in total it probably means more debt and not more people paying their balance in full each month.
I've also had credit report hiccups because of the "debt" on my credit card.
Occasionally the CC company will send me an offer of a loan for very low interest for a year. I run the numbers, and if it looks good, I'll take the loan and invest the money, and pay it back at the end of the term.
The CC company, of course, is hoping I'll miss payments so they can charge me 30% interest. I disappoint them.
Being aware of the time value of money is essential for managing your finances in your own best interest.
How do you keep that from negatively impacting your credit rating?
But when you have $100k of available balance and $10k of debt, the credit bureaus don’t change much when you have $100k of available balance and $20k of debt for 15 months (or whatever the term is).
Now you can easily get 5% returns in money market accounts so if you take a 0% loan with a 3 percent transfer fee on $10k you can basically get $200 for “free” for the juggling. You have to determine if it’s worth it, but if you have larger amounts maybe it’s $500-2k for effectively setting some reminders and not screwing up.
I once read an article on how Amazon made money selling items at wholesale prices. The answer is astute money management. When you bought an item, Amazon charges your credit card immediately, and they get the funds right away. Amazon does not pay the vendor, however, until 90 days have elapsed.
This means they have the use of the money for 90 days, and (of course) they invest the money. Multiply this over millions of purchases, and you're making a boatload of moolah.
I do the same thing, it's just on a very small scale. It's called working the float.
Banks do it, too. Ever notice that when you get a cashier's check, your account is debited immediately? But if you deposit a cashier's check, you have to wait a day or two for the credit. The bank is doing the same thing.
I do agree that being your own bank is really smart, that's why I like DeFi so much... it makes it super easy, without any impact on your credit score.
That said, doing it at a small scale doesn't really seem like it is worth the hassle. $200 isn't worth the time or dings on your credit score. When I've done it before, other cards notice and also start to cancel you or lower your available credit as well.
I have "excellent" credit (780+), a fairly large credit line across several cards (~$100k+) and I never get those year long offers for 0% (or anything less than current interest rates) any more. Those dried up years ago. I don't see how anyone is making this work.
It has, my credit score isn't the greatest. But I don't care. I don't take out loans to buy things because of the high interest rates. Instead, I pay for things with investments.
Borrowing money to buy things is a trap. Borrowing money to buy a new car is financially inept. Buy a beater for cash, invest what you would have spent towards a new car, and eventually the growth in that investment will provide enough to buy that new car. You'll be much better off.
Indeed, this is annoying nonsensical. They should not count credit card balance as debt until it has rolled over at least one payment cycle.
Every summer my credit score drops ~40-50 points when I put the upcoming school year payment on the credit card (they give a nice-enough discount for prepaying) and then a month later bounces right back up after I pay it.
I went on toyota.com and a base level corolla is only selling for $22,795. This includes a "Delivery, Processing & Handling" charge of $1,095. If for whatever reason you think that driving a compact car is beneath you, you can have a mid sized car (toyota camary) for only $27,515.
But back in the real world the on the lot availability of cars is abysmal and most makes are sold out for months of backlog. Like if you want a Toyota minivan it's something like a 2 year wait--unless you are willing to buy one on the lot with a $10k dealer markup.
Now there are only really 5 models of minivan left, so any small jump in purchasing, or misforecasts by a manufacturer leads to huge backlogs.
In 1998 I bought a used 1989 Chevy Corsica for $1,800 all-in out the door. I'll admit I don't remember how many miles it had but it never had any major problems in all the years I drove it. There was a near unlimited sea of options for ~10 year old cars for around $2,000.
In 2023, if you want a similar size 10 year old car (2013) a quick Googling suggests you'll be paying about $10,000 for a car with 100-120k miles on it. Expect to pay $20,000 if you want a low'ish amount of miles (under 25k). Keep in mind this is the price on the website which you know will be more by the time you really purchase it.
It's not quite that much. You calculated inflation off 1989 when the sale happened in 1998.
An inflation calculator puts $1,800 @ 1998 being worth $3,375 @ 2023. It's a massive difference in how much more expensive an inflation adjusted car is nowadays.
The only car we had problems with was 10 year old Jeep for my son that we had to keep taking back for various things for the first couple of months.
The manager proactively reached out to me and offered to reimburse one month payment. After those two months, we never had a problem with it.
I got some bad news, there is no dealership that thinks a $22k Corolla is worth their time when dozens of other buyers are willing to spend $30-40k or more for other models. The higher the price out the door generally the more money the dealership is making.
I'm well aware. It's just that toyota.com is an online resource that's easy to find and and verify. Sure, dealer pricing is more "accurate", but it requires much more legwork on my part and even then it turns the whole thread into an anecdote-fest with people saying "well the dealers in my area are charging $9000 market price adjustment (or whatever) so you're wrong!" or "I called around a few dealerships and found one that gave me a $2000 discount!". Doing a quick search on reddit for "dealer markups" in the past 6 months turns up plenty of anecdotes of people being able to secure cars with no or very little dealer markups.
In 2018 I bought a top end accord for $31k. So prices are definitely much worse now.
Other brands surely have cheaper basic options, and although I might not recommend going all the way to a Stellantis/GM car, a Ford/Honda/Mazda might be available for less and still be acceptable for quality.
I wanted to buy a Corolla Hybrid, but the wait list was ridiculous, something like 9 months. Toyota has major supply chain issues.
I ended up getting a (non-hybrid) Honda Civic for under $30k. I still had to wait a month though.
Armchair economist-shoppers, I love them. The other day a guy told me housing in NYC was absolutely affordable. Managed to find a bedroom for rent at $2k/mo. Sure bro, let me stuff my family of four into a shared 1br apt and then have my kids share a bathroom with some random guy in the other room.
Sure, i'd do this if I was desperate...but WTF would I want to aspire to this setup if I just spent 6yrs in college and went to a top Engineering CS program. Come on.
That's part of the problem - there are still some careers where people can "make it" and mentally say "well if you'd just done what I did, you'd be fine"
I don't think that situation is fine for anyone, and we should reinforce that. It's just not ok. People stay in abusive relationships for housing, all kinds of negative shit. Nobody should be forced to live like that.
We have the materials and the money; the system is broken.
When Scion was around it was supposed to be customer driven, but the sales people were the same Toyota salespeople and couldn’t help themselves. Are treacherous people drawn to (car) sales or does sales make people treacherous?
The corolla isn't some niche car. It's the 12th best selling car in america with 222k units sold per year.
https://www.caranddriver.com/news/g39628015/best-selling-car...
Cars are dramatically more reliable than they used to be, so you will get more utility than you would for the same (inflation adjusted) expenditure 20 years ago.
My vehicle is 16 years old and I have no intention of replacing it any time soon.
Consumer debt service payments as a percent of disposable personal income - is at 5.6%. In 2016 it was around 5.5%-5.6% - despite far lower interest rates. The same figure was 5.6-6% in the 1995-2000 years.
Household debt service payments as a percent of disposable personal income - at 9-10% this year is at one of the lowest levels in 43 years. That figure was over 11% in the 1995-2000 years.
The ratio of household debt to gdp is around 0.73%. That's lower than 2011-2019 years.
US households are in fact in decent condition, despite a loud minority of people proclaiming the end of the world. The facts do not support the dire claims.
Household assets in Q1 2023: $168 trillion. Liabilities: $19.6 trillion. $149t net worth.
Household assets in Q1 2016: $106 trillion. Liabilities: $14.5 trillion. $91t net worth.
In seven years US households added $62 trillion in assets against $5.1 trillion in liabilities.
The US has gotten dramatically wealthier in the past seven years. That's how people are affording everything.
US gdp per capita is $80,000 (with ~337 million people). That's nearly France + Britain combined. There is a vast underestimation of how much income the US has and how rich the US is.
The US median household has a higher net worth than either Sweden or Germany. And the US household income and disposable income figures are typically among the highest in the world.
top X% got dramatically wealthier.
If you believe this is true in a practical sense for the bottom half of income earners, then I've got a bridge to sell you....
I don’t know if there’s a good median equivalent of gdp per person as it’s not really household income.
Whereas mortgage payments with a fixed interest rate don’t increase so really only expenses like taxes and insurance increase over time. So after 40 years your monthly spend may be 1.5-2x.
I’m expecting that eventually there will be an interest only perpetual mortgage where the principal never decreases so banks are basically just buying secured annuities based on the real estate collateral.
Some countries have 99 leases that sort of operate like this and I thought it was strange that people would be willing to pay to purchase these leases where they never owned the property. But I guess some stability is better then none.
Every apartment I've lived in outside the US I've been closer to at least one grocery from my front door than a parking space I'd be likely to find in a US suburban shopping center would be. A two minute walk down a cobblestone street usually. When I was in the US I tried to stay in as "walkable" places as I could and (other than in NYC* ) I still needed to hop in a car and drive 5 minutes down usually a 6 (!) lane street, wait at no less than two traffic lights at large intersections. We are talking about around $15-20 million of infrastructure involved in my trip to the grocery, plus wear and tear on my car, gas, a parking garage at my apartment compared to some trivial amount to maintain a pedestrian walkway. You don't notice it when you live in the US because it's just part of the background.
Not only are there the direct costs of the infrastructure, but the wasted space reduces available land and drives up prices significantly.
* NYC is a special case, Manhattan is essentially the only walkable place in the country (and even there it falls short of global standards), the geography and history impose unique constraints, and the city draws a lot of people for reasons that aren't generally relevant when we're talking about the housing situation globally.
This is nowhere near true. Tons of suburbs are perfectly walkable to all kinds of stores and service you could want. I've lived in 6 places in the US and only one of them was not within convenient walking distance of plenty of stores, entertainment and services (and that one was because I chose a fairly rural area at the time).
Yes you can find unwalkable places in the US but you can also find plenty of walkable places if you look for that.
The New York subway system is the only mass transit system in the US which could stand up to international comparison with a straight face, and NYC is still quite car focused. Sure there are some bike lanes, a few temporary street closures and 14th is closed to private cars now during the day, but still there is no large dedicated pedestrian area in New York of the kind you find in nearly all European cities.
I'd say that's trending into No true Scotsman territory. If it isn't exactly like some elsewhere, it's not true walkability?
To me the definition is very simple: a home is walkable when I can get to my daily & weekly needs by walking. Enough supermarkets, restaurants, assorted shopping, entertainment, bars and plenty of services are all within walking distance.
> even most people who can afford to choose not to own one
I think this is throwing off your walkability definition. A home can be extremely walkable even when the residents own a car. Owning a car in the US is cheap and easy so even if I walk to 95+% of my needs (which I can), it's still nice to own cars for the edge cases. That
IMHO vehicles are huge drivers of debt. There are almost no cars under $30k now, and the average sale price of new cars is pushing up near $50k. This is for bog standard stuff like Hondas and Fords, not luxury cars. Used cars are incredibly expensive too. People are financing cars for well over 5 years now--I've heard of people on 6 and 7 year loans now just to make monthly payments possible. It's nuts.