U.S. households continue to struggle, adding $320 billion in debt last year. It marks the highest level since the 2008 financial crisis which saw millions lose their homes.
Households owe a combined $17 trillion as a result of their mortgages, student loans, credit cards and auto loans, according to WalletHub. Current debt levels are approaching the $18 trillion held by households in 2008, the year in which the American housing market collapsed and the world was plunged into a severe recession.
The typical American household had nearly $142,700 in debt at the end of 2022, much of which came from an average of $100,700 in mortgage debt. An average auto loan balance of $13,100 and student loan balance of $13,500 composed much of the remaining balance. A separate study published by WalletHub last month indicated that average credit card debt increased from $8,500 in the first quarter of 2021 to $9,300 in the third quarter of 2022.
The increased debt levels come as inflationary pressures continue to affect consumers. Inflation reached a 6.4 percent year-over-year rate as of January, according to a report released by the Bureau of Labor Statistics last week. Prices for groceries, energy and other necessities rose even as inflation continued to fall from the 9.1 percent year-over-year rate recorded in June 2022.
Overall food inflation reached 10.1 percent last month, considerably exceeding the 6.4 percent headline inflation rate. The national average price of gasoline is currently $3.39 per gallon, constituting a 42 percent increase since President Joe Biden assumed office in January 2021, according to data from the Energy Information Administration
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Americans continue to spend beyond their means on some products despite the economic pressures, relying upon a combination of consumer debt and savings accumulated during the lockdown-induced recession. The average amount of debt among those who spent beyond their means during the most recent holiday shopping season rose to $1,549, marking a 24 percent increase from the previous year, according to a survey from LendingTree. The percentage of debtors who expect to take five months or more to pay off their debt rose from 28 percent to 37 percent.
The total level of consumer loans increased from $1.5 trillion at the beginning of the Biden administration to $1.8 trillion, according to data from the Federal Reserve. The personal savings rate has dropped from 20 percent to slightly more than 3 percent over the same period, according to data from the Bureau of Economic Analysis, marking a significant decline from typical rates witnessed before the lockdown-induced recession.
–Alan Goforth | Metro Voice