The consumer is getting really tired. Its piggy bank - the homeowner's equity - is empty, its credit cards are (almost) maxed out, and with the gasoline prices and food prices getting higher, the question is how long until we start seeing personal bankruptcies on the rise, along with the continuous string of foreclosures.
According to a report by Moody's, household credit quality has never been worse. Deliquencies and defaults are at or near record highs and rising accros all household liabilities. Household liabilities that are in deliquency and default totaled $775 billion at the end of June, according to data from Equifax. This is equal to 7.5% of all liabilities, and compared to 3% from just two years ago, is a huge leap.
Credit Cards
Deliquencies and defaults are not at record highs, but they too are rising quickly. So far the growth in borrowing keeps the deliquency rates low. Credit card receivables are rising at close to double-digit rate as homeowners, unable to borrow from their own home equity, are turning back to credit cards for cash. The states with the highest increase in credit card receivables are Nevada, with 30%, Florida, with 20% and California with 15%. The new wave of credit card deliquencies will keep us awake well into 2009.
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