Consumer Resilience

Consumer Resilience

     Overall, the US economy is very strong, and we see that with the US consumers. American households enter the second half of 2026 with balance sheets that look solid overall but with a few concerns. Home equity remains a cornerstone of household wealth, while consumer debt levels and thin savings buffers highlight ongoing pressure points—particularly for lower- and middle-income families.

     The housing market continues to operate under the dual constraints of elevated mortgage rates and limited inventory. Rates have dropped over the past year or two, but many homeowners are reluctant to move because they still have an interest rate below 4% from the post-pandemic rate cuts.

     Total household debt is roughly $18.8 trillion, and $13.1 trillion of that is home mortgages. The remaining non-housing debt of $5.7 trillion is the more concerning number. This has steadily increased over the last 10-12 years relative to housing debt. In 2014, the non-housing debt accounted for less than 25% of the overall debt. It is now around 30% of overall debt. This raises concerns because non-housing debt has a higher interest rate associated with it and is not backed by real estate.

     We are not seeing elevated delinquency rates. Mortgage delinquencies are at a very low percentage, and consumer debt delinquencies are still well below historic averages. However, we have seen savings rates this low only a few times. The average savings rate is 2.7%, which is not nearly high enough. Compare this to the debt service rate of 11.2%, and you can see that Americans are borrowing to spend and not saving their disposable income.

     What this means for the overall economy is less stability. If there are slowdowns in the job market or shocks to the system, average Americans are not in a strong position to adjust their lives. If they own a home and have a low interest rate, they may be able to adjust their lives reasonably well. But if they are renting, they may fall into the “at risk” segment of the population that has too much debt and isn’t saving money. This segment tends to have lower incomes, but there are also households with good incomes that are still unable or unwilling to save and position themselves for the future.

     One of the good signs in the economy is that wage growth continues to be strong year-over-year. Currently, we are seeing wages rise around 3.8%. This is important when compared to inflation rates. Wage growth has been higher than inflation for the past 3 years, and that is a huge stimulus for the US economy and the American consumer.