2017 Quarterly Consumer Debt Report

From DBEDT, February, 2018

EXECUTIVE SUMMARY

At the end of the fourth quarter of 2017, Hawaii’s total consumer debt per capita of $64,642 was considerably higher than that of the overall U.S. Hawaii’s per capita consumer debt averaged more than $20,000 above the nation, which was 46% higher than the U.S. per capita consumer debt of $44,284.

For Hawaii consumers, mortgage debt comprised the largest share of the total consumer debt, at approximately 77% of the total. Mortgage debt, as a share of total debt in the U.S. was lower, at about 69% of total consumer debt. However, for both Hawaii and the nation, only about 17% of the population had mortgage debt. Although Hawaii’s average mortgage debt balance was higher, Hawaii appeared to manage this debt better, as indicated by lower mortgage default rates than the U.S. overall.

Other real estate-focused credit lines were also high in Hawaii. While relatively less prominent in other states, the home equity line of credit (HELOC) was about 5% and the home equity loan (HE Loan) was about 1.4% of the total consumer debt in Hawaii. Total amounts in these categories were lower in the nation, at 3.5% for HELOC and about 1% for HE Loan. Auto loans and leases comprised over 5.1 % of total debt in Hawaii and over 9.2% in the nation. Bank cards’ total balance as a proportion of all debt was also different in Hawaii as opposed to the nation in general (4.8% in Hawaii, but 5.9% in the nation). The share of student debt to total debt was another area of divergence between consumer debt in Hawaii and the nation – student debt was about 4.8% of the total consumer debt, while for the nation it was over 9.8%.

An area of concern for Hawaii consumers and debt-holders should be the recent rise in short term interest rates. Variable interest rate debt, such as credit cards and home equity lines of credit are expected to rise due the U.S. Federal Reserve Bank’s (the Fed) action of raising interest rates. In 2017, the Fed raised its Federal Funds rate three times; 25 basis points each time in June, September, and December. More increases are possible in 2018, as unemployment remains at all-time low (and below the Fed’s target of 4.6%, an indicator of “full employment”), and inflation approaches and potentially surpasses the Fed’s target of 2 percent (Figure 1) 1 .

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HNN: Report: Hawaii residents carry much more debt than national average