A growing number of Californians – and fellow Americans – are having some trouble paying their bills.
If you want to see evidence of a slowing economy that’s taxing some consumers, look at a quarterly report from the Federal Reserve Bank of New York that digs inside credit histories from Equifax. My trustee spreadsheet looked at the fourth-quarter results for California, the nation overall, and the state’s two economic rivals – Texas and Florida.
Consider bills that are 90 days late or more. In California, 1.23% of consumers with credit histories have missed payments, up 0.22 percentage points in a year. It’s also the highest level in a year and a half.
Still, delinquent California debts are below the 2.1% rate found at year-end 2019 – a benchmark for let’s say “normal” pre-pandemic economic conditions.
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And Californians are better at bill-paying than elsewhere in the nation, where 1.74% of US bills were skipped – up 0.22 percentage points in a year.
Florida was at 2.58% up 0.6 points in a year. Texas had 2.42% late payers, up 0.29 points in a year.
Clearly, the Federal Reserve’s attempts to cool the economy and its problematic inflation smacks numerous household budgets. Higher interest rates – especially on shorter-term debts like credit cards and auto loans – are painful to many family’s checkbooks. Pricey mortgages simply crashed the homebuying pace.
Yet, we see that few bill problems are severe. California bankruptcies run 32 per 10,000 consumers, vs. 54 at year-end 2019. That’s below the nation’s 40 per 10,000 and Florida’s 37. Texas is at 27.
The important thing to know is that this increase in tardy payments is a bounce up from a mid-pandemic low when consumers were stuck at home and not spending much money, plus many people got various government stimulus checks. Comparisons to 2019 provide a scale for this late-payment upswing.
Mortgage moderation
Now you can’t chat about bills without thinking about mortgages. That’s a bit of PTSD from the bubble-bursting Great Recession of two decades ago.
Again, delinquencies are up, but still below the days before coronavirus.
In California, 0.36% of mortgages were 90 days or more late. Yes, that’s doubled in a year and the highest level in seven quarters. Still, this is less than half of the Golden State’s 0.8% tardy mortgages at year-end 2019 as well as better than elsewhere in the US.
Nationally, there was 0.57% delinquency rate, up 0.14 percentage points in a year. Florida’s at 1.07% late – up 0.68 points in a year. Texas had 0.66% slow payers, up 0.31 points.
And the worst-case scenario – foreclosures – is up but remains negligible.
California had 10 foreclosures per 10,000 home loans – up in a year but well under 17 seen at year-end 2019. Nationally, 14 per 10,000 – up 2. Florida’s 15 per 10,000 was up 5. And Texas’ 12 was up 2.
Pile of debts
Yes, California’s do carry a lot of debt – mainly the result of sky-high house prices. But growth is meek, which could be a sign of consumer skittishness.
Statewide, debts run $84,960 per person – 81% tied to mortgages – the ninth-highest level in data dating to 2003. It’s up a barely noticeable 0.1% in a year and up 17% since 2019.
Nationally, debts are only $61,039 per capita – one-third less than the Golden State’s pile – but that’s a record high and an 1.9% increase in a year and up 18% since 2019.
Florida is at a record $60,040 – up 5.2% in a year and 27% since 2019. Texas hit a record, too, at $56,890 – up 3.4% in a year and up 26% since 2019.
Bottom line
As of the end of 2023, there was no epidemic of financially swamped households.
That’s not dismissive of real economic pain for many families. It’s simply what these broad debt figures show.
A key reason is the job market is cooler but still worker-friendly on a historic scale. And paychecks for many workers have grown near the pace of inflation.
Think about California’s unemployment rate at 4.6% for all of last year. Yes, that’s up from 4.2% in 2022, but did you known joblessness averaged 7% statewide during the previous three decades?
And California is by no means alone with historically low unemployment.
Last year’s national jobless rate of 3.2% is nearly half of 6% seen in 1980-2019. Florida at 2.7% and Texas at 4.1% are both well below each state’s three-decade rate of 6%.
So, please don’t ignore slow payers. Growing late payments must be watched closely as the bumpy economy evolves.
Just take it in with a shot of perspective.
