Record Consumer and Government Debt
More than 12 % of outstanding credit card balances are 90 days delinquent, which is the highest percentage since 2011. Delinquent student loans( in red) are rapidly rising to almost 8 % as well as of the first quarter of 2025.
The Federal Reserve conducted a survey recently and asked a large pool of U. S. consumers if they had $ 2,000 in cash savings to cover an unexpected emergency expense using only their savings and not any credit cards.
The Fed’ s survey results were as follows:
• 52 % of U. S. consumer respondents could not cover a $ 2,000 emergency expense using only their cash savings.
• 31 % of surveyed consumers could not cover a $ 500 cash expense.
• A record 37 % of respondents described inflation as their # 1 primary financial challenge.
In the first quarter of 2025, the federal debt was increasing in size by about $ 1 trillion every 100 days. The U. S. dollar has now lost almost 9 % of its value this year, according to Barchart.
In 2024, world governments issued more debt than ever before. For example, sovereign bond issuance across the planet reached a record $ 18 trillion dollars in 2024, as per the Kobeissi
Letter. Approximately $ 16 trillion was issued by developed countries like the United States, and $ 2 trillion by emerging market economies.
The total world government bond issuance has nearly doubled since 2019. Over the past five years, governments have issued more debt worldwide than in the eight years before the 2020 pandemic declaration.
Wealth Creation, Leverage, and Home Appreciation
U. S. homeowners have an average net worth of $ 430,000( it ' s significantly higher or more than double in California for many), while renters average just $ 10,000.
The power of leverage for home purchases can increase the annual cashoncash return from 5 % to 50 %+, depending on the down payment invested.
It ' s not just your down payment or cash equity that is appreciating each year like with stocks. Rather, it ' s the total overall home value that may be leveraged anywhere between 80 % and 100 % LTV( loantovalue) with a purchase mortgage.
The average retired homeowner has more than 80 % of their entire net worth tied up in the equity in their primary home where they live.
If mortgage rates suddenly fall soon, will buyer demand rapidly increase to
Image from Canva Pro help offset the rising supply numbers? Conversely, will rising rates scare off many future buyers who may be struggling to qualify for these high home prices?
It’ s more likely than not that both consumer and government debt will continue to increase in the near future. If so, our dollar may continue to weaken and inflation will keep steadily making prices less affordable for goods and services.
If you rent, inflation is not so fun as your annual rents paid may consistently increase. However, homeowners and landlords usually enjoy the power of leverage and appreciation as their overall net worth continues to grow over time.
Two exceptional hedges against inflation have proven to be real estate and gold. The main difference between these two investment choices is that you can live in homes where you can store your gold bars too.
MEET RICK TOBIN
Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30 + years. He’ s held eight( 8) different real estate, securities and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’ s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans. com for financing options and his new investment group at SoCal Real Estate Investors for more details.
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