Spending down as households struggle with debt payments
U.S. households have cut back recently on spending as they face challenges making student loan and credit card payments, according to a report by CoStar on Wednesday.
Personal spending fell a full percentage point in the first six months of the year, while the share of household debt balances in delinquency reached 4.4% in the second quarter, CoStar analysts Christine Cooper and Chuck McShane said in the report. That’s the highest level of delinquency since early 2020, they said, citing the Federal Reserve Bank of New York’s quarterly consumer credit panel report.
“The sharp rise in longer-term delinquencies reflects a subset of struggling consumers, and comes at a time when overall spending has been flattening in the face of job-market uncertainty,” the authors wrote.
Student loan delinquencies, which reappeared on credit reports this year after they were paused during the pandemic, are the immediate cause of the issue. The share of student loan balances more than 90 days overdue jumped from less than 1% at the end of last year to more than 10% in the three months from April through June, according to the report.
Though credit card delinquency actually improved during those three months, credit card debt has grown at more than double the pace of total debt since 2022, Cooper and McShane said.
“The second half of 2025 could reveal if high-income consumers can continue to carry the economy and whether the debt challenges seen in the data are as confined as analysts assume,” they said.
Homes in certain regions saw big five-year equity gains
A rapid rise in property values in many U.S. regions in the past five years led to substantial home equity gains, particularly in the South and Midwest, according to a report Wednesday by financial services firm Bankrate.
Low mortgage rates during the pandemic also contributed to homeowners’ growing equity, which is their home value minus their mortgage balance, the report said. Mortgage holders accounted for just over 60% of residential owners in 2023, according to the National Association of Home Builders.
In terms of absolute dollar amounts, high-price states such as Hawaii, with average equity growth of more than $167,000, California and Massachusetts saw the largest increases. But in percentage terms, more affordable states in the South and Midwest experienced more growth. West Virginia led all states with a 450% equity hike, followed closely by Oklahoma. Others in the top five were Connecticut, Kansas and Illinois.
“Many of the states seeing the highest percentage increases have been flying under the radar,” Bankrate financial analyst Stephen Kates said in a statement.
At the other end of the spectrum, the average Washington, D.C., and Louisiana homeowner lost home equity over the past five years, Bankrate said. The report said while the nation’s capital has high home prices, values have only risen 2.8% since 2020. Louisiana’s equity drop can be attributed in part to high insurance costs and weather-related risks, according to the report.
First-time buyers holding their own
Despite high prices and mortgage rates, people buying homes for the first time appear to be keeping up with repeat buyers in terms of their age, loan amounts and credit scores.
That’s according to a report Monday by the New York Federal Reserve Bank. Between 2019 and 2024, the median age of first-time buyers stayed put at 33. Meanwhile, the gap for median mortgage balance at the time a loan is taken out between repeat and first-time buyers fell to $29,653 in 2024, down from $36,750 in 2022.
The report also found that the average credit score for repeat buyers in 2016 was 750 and 714 for first-time buyers. By 2024, both groups had raised their scores, with repeat buyers now at 775 and first-timers at 734.
“First-time home buyers have been more resilient than many feared in the tight housing market of the past few years,” Donghoon Lee, a New York Fed economic research adviser, said in the report. “One strategy used by first-time buyers in this difficult market may have been to focus their house search in lower-income ZIP codes.”
