Woo Hoo! Another Record Broken!

We Americans just love breaking records, don’t we?  Whether it is the stock market, sports, weather, you name it, hardly a day goes by when we don’t break a record of some sort. 

Well we broke another one during the first quarter of 2017:  we are now at all-time highs for consumer debt in our country—a level not seen since the recession of 2008! 

A record to celebrate?  One would think not, at least at first glance.  Yet perhaps not quite as alarmist as it may seem either. 

According to the “Quarterly Report on Household Debt and Credit” issued by the Federal Reserve Bank of New York, during the first quarter of 2017 total household debt reached $12.73 trillion, which “finally surpassed” (their words, not mine) the $12.68 trillion peak reached in 2008.

As a percentage, the change represented just a 1.2% increase, but that still represents a $149 billion change quarter to quarter.

To my mind, those are still huge numbers. 

The New York Fed points out that this growth represents a solid three years of increasing debt largely a factor of steady, if slow, economic growth in the country.

In its press release of May 17th they seem to want to make sure we keep things in perspective.  That is, any parallel with 2008 may be misplaced.

Quoting the press release: “…although debt has reached record heights, this number is in nominal terms and it took an unusually long time from a historical perspective for debt to reach the 2008 level again.”

According to the Research Officer at the New York Fed, Donghoon Lee, “Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today. This record debt level is neither a reason to celebrate nor a cause for alarm.”

The report notes that delinquencies still remain, in aggregate, quite low—about 4.8% of outstanding debt is in some stage of delinquency. 

Yet there are troubling signs: “While most delinquency flows have improved markedly since the Great Recession and remain low overall, there are divergent trends among debt types. Auto loan and credit card delinquency flows are now trending upwards, and those for student loans remain stubbornly high.”

Some key, if admittedly wonky, takeaways from the report (directly quoting the press release here):

Housing Debt

  • Mortgage balances increased again while originations declined and median credit scores of borrowers for new mortgages increased, reflecting tightening underwriting.
  • Mortgage delinquencies worsened slightly and foreclosure notations increased but remained low by historical standards.

Non-Housing Debt

  • Auto loan balances continued their steady rise seen since 2011 while auto loan originations declined and median credit scores of borrowers for these new loans increased.
  • Credit card balances declined, delinquencies increased and the aggregate credit card limit increased for the 17th consecutive quarter.
  • Student loan balances increased – marking an increase in every year throughout the 18-year history of this series.

Bankruptcies & Delinquencies Overall

  • Aggregate delinquency rates were roughly flat.
  • Bankruptcy notations reached another low [in] the 18-year history of this series.
  • This quarter saw a notable uptick in credit card debt transitioning into delinquencies, a continued upward trend of auto loans transitioning into serious delinquencies, and student loan transitions into serious delinquencies remaining high.

By and large these debt and delinquency trends, while apparently still manageable, cannot continue unabated.  We are fortunate that the economy continues to grow (albeit slowly), markets are for the most part stable, as is job growth.  Consumers can still afford to pay their debts, but at all-time highs there is not much wiggle room for sudden shifts in the economic or political landscape.  We continue to stress to our clients that they maintain vigilance on their accounts receivables and debt levels despite the seeming ‘goldilocks’ window we currently find ourselves in. 

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 12 years.

Prime Real Estate Season: To Buy or Not to Buy?

Spring is in the air. Walking down the street, you can hear the ubiquitous buzz of lawn mowers in the distance, smell the sweet fragrance of fresh cut grass, and see beautiful flowers blooming everywhere.  Do you know what else you see popping up in yards this time of year?  For sale signs.

Spring marks the beginning of the busiest home selling and buying season in most areas across the United States.  Common sense might tell you the best time to put your house on the market is during this prime real estate season that begins in the spring and lasts through the summer. But is it really the best time to buy?  The answer to this question begins with another question?  What is most important to you: price, a large selection, or convenience?

If you have school-age kids convenience is probably extremely important to you which means you’ll most likely be buying with the masses—in the summer—so you will be all moved in and settled before the kids start school.  If this is the case, it’s going to be one of those ‘I’ve got some good news and some bad news’ situations.  The good news is that with all of the homes on the market you will have a lot of houses to choose from.  The bad news? You are going to pay more for it.

I know this sounds counter-intuitive since typically when inventory is up, prices tend to go down.  But in real estate the opposite is true.  NerdWallet conducted a study last fall that analyzed the past two years’ worth of listings and sales in the 50 most populous metro areas in the U.S. using data from Realtor.com.  According to the article I read, what they found was that the sale price—the amount buyers actually paid—was highest during the peak summer season. House inventory was also the highest during peak season. And since a lot of people are wanting to buy during the summer, competition was the highest too, which explains the high sale price.

Interestingly, after the summer season is over real estate listing prices really don’t fall that much—less than a half of one percent, but actual sale prices, the amount buyers paid, dropped almost 3 percent. Using average pricing in the 50 metro areas, that’s a savings of $8300 for buyers who waited until fall (September – November) to purchase their homes.  And if you want to save even more money, wait until winter.  Homes bought in January or February had the cheapest sales price and cost almost 8.5 percent less on average than houses sold in the summer (June-August).

“If your circumstances give you the freedom to be able to choose the best time to look to sign a contract on a new home, there’s no question that the market dynamics favor you the most to do that in the dead of winter, ideally in January or February, right before the activity starts to heat up,” says Jonathan Smoke, chief economist for Realtor.com.

Right now the real estate market is hot.  Houses are looking their best, inventory is abundant, and if you play it right, you can close on your new property and move in while the kids are off on summer break. But if a good price is what you are looking for, hold tight this is not the best time for you to buy

A.  Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 12 years.

                                                                                                             

 

Creepy Cavities Invade American Emergency Rooms

Perhaps some of you may recall me mentioning, a few months ago in an unrelated blog, my fear of going to the dentist.  Some of my aversion is pain-related from a bad childhood experience. The other part is a fear of what it might cost.  Like most things in life, dental care costs money, and sometimes, depending on what’s wrong—lots of money. To go or not to go is a complicated conundrum for many of us.  Did you know you can actually die from a tooth infection? That’s why emergency room doctors and dentists around the country are sounding an alarm.  There are way too many preventable ER visits related to dental decay and infections.

Unfortunately, there are many people out there who “postpone” their dental care to the point where millions have ended up in emergency rooms in hospitals across America.   In fact, according to the American Dental Association’s most recent data, ER visits for dental-related issues have doubled from 1.1 million in 2000 to 2.2 million in 2012.  And if that’s not enough, according to Healthjournalism.org, more than 4,000,000 patients visited hospital emergency rooms for dental care between 2008 and 2010, resulting in a cost of $2.7 billion.  Had these procedures been done in a dental office instead of the ER, the costs would have been a third of this figure.

Research shows 85% of ER visits for dental problems were made by people who lacked dental insurance or had Medicaid.  Medicaid recently expanded coverage to many lower income adults.  However, the expansion did not include an increase of providers. ER visits were probably an easier option to those seeking dental care rather than increased travel or longer waits.  Also, for some Medicaid patients, the ER is their usual go-to place for healthcare.  So, when their tooth is throbbing, it makes sense for them to visit the ER. 

George Acs, DDS, director of the dental department at Chesapeake Health Care in Salisbury, MD said people with oral pain and infections are inundating hospitals.  He testified before the Maryland State Congress in 2016, “More than 2,000,000 emergency room visits were attributed to neglected teeth last year”.  He reiterated, “Although those hospital visits in America cost an estimated $1.6 billion a year, the ER is not equipped to fix dental problems.”  Too often, the patient is given antibiotics and pain medicine. Then told to make an appointment with a dentist. 

So, here’s the takeaway; postponing dental care is a lose-lose proposition, especially if doing so lands you in a hospital. Not only will you likely be in more pain due to neglecting care, the treatment will cost 3 times more in an ER than it would at your dentist’s office. Plus, in many cases, the ER will not even be able to correct your dental issue—costing you even more money for follow up care.  Remember one of healthcare’s cardinal rules, because in this case it sings truer than ever: preventive care is far more cost-effective than reactive options.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 12 years.