Americans are facing a new financial milestone—credit card debt has surged to a record $1.21 trillion. According to the Federal Reserve Bank of New York, credit card balances jumped by $45 billion in the last quarter of 2024 alone. Compared to last year, balances have increased by 7.3%.
At the same time, more Americans are falling behind on payments. Data shows that 7.18% of credit card balances are now overdue, which suggests that many people are struggling to manage their debt.
With rising inflation, high interest rates, and declining savings, this debt spike raises major concerns for consumer spending, mortgage affordability, and homeownership stability. The big question now is: Could this growing debt crisis spill over into the housing market?
Why Credit Card Debt Is Rising
Several key factors are driving the surge in credit card balances. Although each plays a unique role, they all contribute to increased financial strain on households.
1. Inflation & Cost of Living
Everyday expenses have skyrocketed in recent years. As a result, many Americans now rely on credit cards to cover basic needs like groceries, gas, and rent. This reliance has only grown as wages struggle to keep pace with inflation.
2. Post-Pandemic Spending
After the pandemic, household savings dwindled while consumer spending habits remained strong. To maintain their lifestyle, many people turned to credit cards instead of cutting back on expenses. Unfortunately, this has led to a rise in revolving debt.
3. High Credit Card Interest Rates
Even though the Federal Reserve lowered its key interest rate in late 2024, credit card rates remain above 20%. Consequently, borrowers are finding it difficult to pay down balances, leading to higher monthly payments and increased financial strain.
The result? More Americans are carrying larger balances for longer, which makes it harder to get out of debt.
How Rising Debt Could Impact the Housing Market
The surge in credit card debt isn’t just a personal finance issue. It could have serious consequences for the housing market and mortgage industry in multiple ways.
1. Fewer Buyers Can Afford Homes
With higher monthly credit card payments, many potential homebuyers now have less money to save for a down payment or qualify for a mortgage.
First-time homebuyers may struggle with debt-to-income (DTI) ratios, making it harder to get loan approval.
Even buyers with good credit may find it difficult to secure a mortgage when carrying large amounts of outstanding debt.
Wondering what you can afford? Use our Loan Affordability Calculator to see how debt affects your budget.
2. Higher Risk of Mortgage Defaults & Foreclosures
If credit card debt continues to rise, financially stretched homeowners may start missing mortgage payments. Consequently, mortgage delinquency rates could increase.
More delinquencies could trigger a rise in foreclosures, particularly in high-debt areas.
A wave of foreclosures could cause home prices to drop, making it harder for sellers to find buyers.
Worried about mortgage payments? Use our Refinance Calculator to explore your options.
3. Home Prices May Decline in Debt-Burdened Markets
If buyers struggle to afford homes, demand for real estate could drop. As a result, home values might decline in certain markets.
High-cost areas may see price slowdowns or decreases as fewer buyers can afford homes.
Sellers may need to lower prices to attract buyers who are financially stretched.
Bottom line: Rising credit card debt could cool down the housing market, particularly in areas where affordability is already a challenge.
What This Means for Homebuyers & Homeowners
Whether you’re buying, selling, or already own a home, rising credit card debt could have a significant impact on your financial decisions.
For Homebuyers:
- Expect stricter lending requirements as lenders account for rising consumer debt.
- Paying down high-interest debt before applying for a mortgage may improve your approval odds.
- Shopping for the best loan options can help maximize affordability.
Compare mortgage rates with our Loan Compass Tool.
For Homeowners:
- If you’re struggling with debt, refinancing could free up cash.
- Monitoring your home’s value will help you stay ahead of market changes.
Check refinancing options with our Refinance Calculator.
For the Housing Market:
- If credit card debt keeps rising, foreclosures may increase.
- Housing demand could slow, leading to potential price adjustments.
The Bottom Line
With credit card debt hitting $1.21 trillion, financial strain is mounting across the country. This could have serious ripple effects on homeownership and the real estate market.
- Debt-laden buyers may struggle to qualify for mortgages.
- More homeowners could fall behind on mortgage payments, increasing foreclosure risks.
- Slower home sales and potential price drops could follow if affordability worsens.
Staying informed is key. If you’re a buyer or homeowner, now is the time to evaluate your options, manage debt wisely, and plan for financial stability.
Get ahead of market shifts with our Loan Affordability Calculator and Loan Compass Tool.
