Trillions in Debt, Delinquencies Rising, Interest Costs Set to Double Again | Numbers Scream

Tom Ellsworth, The Biz Doc, and welcome back to Numbers Scream. This week delinquency and debt rates were screaming and I pulled them all together because they're related and it's an interesting look that we should be aware of. We start with commercial real estate. CRE delinquencies are up to four. Debt delinquency rate 4.8 overall for all debt consumers. Gen Z having a tough time with delinquency of 8.6 percent. Interest on the U.S. debt, that's the debt that we owe on a national level in the trillions. 23 percent of the budget per year is just the interest on that debt. We'll unpack it. And finally, auto loans, the percent that are prime, the best borrowers, 42.8 percent, which means if you don't have good credit, it's really hard to get a car. Before we dive into all those numbers, let's talk about how BetDavid Consulting can help you with your numbers. BetDavid Consulting, we do educational seminars, conferences such as the vault, and more to help you drive your business higher. Growth and EBITDA, we want to help you discover more of it so that you can attain your goals and reach your dreams. Go to the link below in the comments, BetDavid Consulting. First up, CRE, also known as consumer real estate. Delinquencies are at four percent. Now, that doesn't seem like a large number until you think about the trillions of dollars of commercial real estate loans that are out there. If you take a look at this chart covering two years from Q1 of 24 to Q1 of 26 that just finished up, you can see what was the loans at four percent are all the way up well over five percent. So the loans that are on commercial mortgage-backed securities, this is a problem. And we can see all CRE is going from three and a half to four. Until you think about it, that's one whole half a percentage point on a small number. So we can see what's happening here. Over the course of a year, we are now coming up in default rates on these loans. There's also a little secret. Every so many years, large tranches of commercial loans come to maturity. It's not 30 years like on your house. They're shorter, and then they have to be refinanced. And right now, as we're sitting in the middle of Q2 2026, the prime rate is up. And what's very interesting is 30-year mortgages are at 6.5 percent as of today, which means other types of mortgages and other types of loans in the stack are up as well, showing that we need some relief. But first, we can't have inflation rise because that forces us to raise the rate to increase the value of money to push inflation down. If inflation goes up, this keeps going up. But if unemployment is up or we detect that businesses need some help, the new head of the Fed, Kevin Warsh, will probably lower rates June 18th, 19th, or July 28th, 29th, with more people like me thinking the rate change is going to happen at the end of July. All of the stats that are coming in will say whether this is in more trouble or we have some easing coming. We will find out soon enough. Next, debt delinquency rate. Let's look at debt across the stack. You have credit cards, HELOCs, auto loans, student loans, mortgages. And this shows you the total amount so you can see that the real number that America carries is $12 trillion in mortgages. But a tremendous amount of those mortgages happen to be low interest rate from years gone by. And if you look at credit cards here, we are now closing in on $2 million. It's closer to $1.8 right now. So if you look at HELOC and credit cards, that's what people look at and get concerned about. A mortgage is on your house. A student loan is for the education you got. And an auto loan is on the car you bought. There's some stability tied to an action taken by the consumer in those. But HELOCs quite often aren't just remodels. It's lifestyle. It's inflation. It's things you're using that money to live on in some form. And then credit cards. So when you look at all this, the average delinquency now is 4.8% with severe derogatory. In other words, very delinquent 1.8. People say, that's not such a big deal. Oh yeah? One year ago, it was 3.6. Which means, especially in these categories, the consumer is feeling the pinch and delinquency is going up a full 1.2 points on the 3.6 from last year. That math translates to an increase of 33%. And suddenly 4.8 doesn't sound so small anymore, does it? Third up, Gen Z. We talked about Gen Z and entrepreneurship and out there with side hustles on a previous episode. Something that I think showed the two sides of the American economy. One side, I'm going to be an entrepreneur and I'm going to have a side hustle. The other side saying, I have to do that because of my student loans and just living. Well, let's unpack it. More of that motivation appears to be coming from the fact of inflation, the affordability crisis, and the ability to live. If we take a look at the Gen Z credit card delinquency of 8.6% and the total delinquency of up close to 10.5%, you can see that Gen Z is in trouble. Gen Z is feeling financial stress. You go all the way to their parents and you're dealing with 2%, 3%, 4% over 50 years old, 4.2 or less. That shows that we have a serious issue here with the younger people launching into jobs, being able to make enough to service not only their lifestyle, but the debt they may have. And the delinquency is up. Is there any correlation to how they're voting and how they're protesting and getting upset about the economy as a whole? Exactly. And it's right here. Interest rates coming down, job and wages coming up and opportunities for them coming up at a time where the headlines are reading AI is causing job loss is putting a pinch on the upcoming generation. And that's a problem. Fourth up, interest on the US debt. Let's talk about the US debt. Take a look at this. This is the deficit. The deficit is the budget was here. We went ahead and spent this by selling T-bills and our debt. What was that gap? Well, in 2022, the middle of the Biden presidency, it hit 1 trillion. It was almost 1.5 trillion the third year of the Biden presidency. And in the final year, it was over 1.5. Well, look at what the carryover is. The deficit is still growing. It needs to shrink. Under the first full year of the Trump administration, it grew to 1.7. And now 2026 is estimated to be 1.9. Wars and a lot of things that are impacting the economy are part of this. What doesn't help is the discovery that there's so much fraud of government dollars going out and a lot of dollars from federal sources like Medicare going out to the states that had Medicaid gaps. And a lot of that is money coming from the federal government to bail out states. And the states aren't helping when they have got Medicaid fraud, hospice fraud that we've seen in California and Minnesota. So this deficit doesn't look like it's going to be going down anytime soon. And shockingly, what about the interest we paid? Just the interest, not paying it down. If you only paid the interest on your credit card, people around you would say, you know, that's not a good way to do it. You're going to be suffering. Well, guess what? That's what the US is doing. And 23% of every dollar collected by the IRS is going for interest in 2026. If you don't think that's a problem, either you're not paying attention or you haven't done the math. This is horrifying. Interest on the debt is about to be bigger than even the defense budget. The debt at the federal level is extreme, but fortunately, it's not delinquent because they just print money or sell the T-bills. But then they add to the interest that they're paying, which is kicking the can down the road for you and me and our children, nieces and nephews in the next generation coming up. Is there any wonder that Gen Z is so frustrated? It's right there. Next up, auto loans. The prime borrower, the best, 42.8%. That is up from about 38% a year ago. And then we go down, see the credit ratings? They're rated. The primes over 760, near prime 660, 759, subprime 580, 659. So slightly questionable, below market. I need to pay a slightly bigger interest rate. And then deep subprime, when you are at 580 or lower and you have to get a car, I don't want to describe what those loans look like and the interest rates that the least capable end up paying, but it's horrifying. If you take a look here, this is about 6% for deep subprime, and this is a little under 18%. So let's go 6 and 18 and call it 24. Do you know what this was a year ago when you had these together? 17.5. What has happened to people with these credit scores? The number of them have gone up. And there are more people down here who need a car and have to buy a car and are ending up in this category. 24% of total borrowers here, a year ago, 17.5% are here. An interesting footnote here, see the Q1 originations, 182 billion? That's the total amount of car loans represented here. A year ago, that was 177, a year before about 180. It's hovered between 178 and 183, stayed in that general area for about two years. So the amount of loans is still at that level. However, the number of people that are on higher interest loans, because that's the credit they have and that's what they end up with, is rising, which also answers the question, why is there such debt delinquency? Well, guess what? Buy now, pay later. You're in a different category to buy the car that you have to buy to get to work. It all adds up to a debt and delinquency storm for the lowest band of American consumers who can least afford it. That's the debt and delinquency storm as I see it in these numbers. You can look them up too and see where they were a year ago and where they're going. Be informed as you make your own investment decisions and live life and try to surf through this economy. If there's something you'd like me to cover or a comment you'd like to make, hit the subscribe button and leave a comment down below. We read all of them, the good, the bad, the ugly, the snarky. We take it all into consideration because we want to deliver you the numbers you want to know or are curious about. Until next time, I'm Tom Mills with The Biz Doc and I hope I left you better than I found you.