Late California loan payments at 15-month high. Should you worry?

The “Looking Glass” ponders economic and real estate trends through two distinct lenses: the optimist’s “glass half-full” and the pessimist’s “glass half-empty.”

Buzz: Californians are missing bill payments at the fastest rate in 15 months. However, there’s a “but” that bears some explaining.

Source: My trusty spreadsheet peeked at the New York Fed’s third-quarter report on how consumers are paying their debts nationwide and in 11 big states. The research studies borrowing and debt payments among people with credit histories tracked by Equifax – roughly 90% of Americans.

Debate: Should we worry about growing skipped payments?

Glass half-full

This summer, as the economy cooled, 1.13% of California consumer debts were tardy by 90 days or more, the highest level of skipped bills since 2022’s second quarter.

And here is the “but” – that slow payment rate is the best among the 11 states and is well below the U.S. level of 1.62%.

The other 10 states, ranked by delinquency difficulties are Florida (2.27%), Texas (2.16%), New York (2.02%), Ohio (1.96%), Pennsylvania (1.87%), Michigan (1.82%), Nevada (1.74%), Illinois (1.69%), New Jersey (1.54%) and Arizona (1.36%).

More importantly, slow-paying Californians look good compared with pre-pandemic times. In 2019’s final quarter, 2.1% of California debts were late (also the lowest of the 11) and below the 3.2% nationally.

Also, ponder the historical pattern: Summer 2023 was a huge improvement over the 20-year average: 3.7% late (No. 9 of 11) and below the 3.9% US level.

Glass half-empty

Californians borrow plenty. That’s why it’s good to carefully eyeball bill-payment trends.

Just how much did we borrow? Consumer borrowings statewide run $84,050 per capita (the highest of the 11 states) and 39% above the US per capita average of $60,680. But note this summer’s debts were 4% below the peak of $88,000 per person in bubble-bursting 2008.

Of course, California’s debt pile is largely about housing. Californians have $67,060 in first mortgage debt per person (No. 1 in the nation) – that’s 57% above the US level of $42,800.

Surprisingly, other Golden State borrowings are relatively modest …

Auto loans: $5,460 per person (No. 5) and 3% below the $5,620 US level.

Student loans: $4,490 per person (No. 10) and 16% below the $5,370 US level.

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Credit cards: $4,210 per person (No. 4) and 11% above the $3,800 US level.

Home-equity loans: $1,330 per person (No. 5) and 8% above the $1,230 US level.

Other loans: $1,500 per person (No. 8) and 19% below the $1,860 US level.

Bottom line

Let’s not forget that recent upticks in payment problems follow record-low levels of unpaid bills.

For example, California’s latest tardy-payment rate is the eighth-lowest level found during the past two decades. The previous three quarters had the lowest delinquency rates since the dataset began in 2003.

So Californians as a group seem able to make almost all of their loan payments. At least, through September 2023.

But I’ll note that Californians have been shy about borrowing since the coronavirus struck.

Third-quarter debts statewide grew by 0.9% in three months – No. 9 among the state and slower than 1.2% US growth.

It’s a longer-term chill, too. California debts in a year expanded by only 1.2% (lowest of the 11) and below the 4.3% growth in the US. And since the end of 2019, Golden State borrowings are up 15% (No. 6) vs. 17% nationally.

Is that thriftiness just Californians being prudent – or is it a sign of economic skittishness?

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com