[Market Brief] Can the US default risk be controlled? A comprehensive breakdown of credit cards, auto loans, and mortgages!

What we want you to know:

Yesterday, the U.S. January employment report was released. Although January non-farm payrolls exceeded expectations, after revisions to the 2025 fiscal year baseline, employment growth was revised down from +584,000 to +181,000, with the average monthly increase dropping from 49,000 to 15,000—almost stagnating. This raises concerns about whether a weak labor market might undermine consumer spending momentum.

Meanwhile, delinquency rates have been rising since 2023, with a continued increase in the proportion of seriously overdue loans (over 90 days late) among U.S. consumers. The rise is especially notable in credit card, auto loan, and student loan delinquencies, indicating that some households’ financial resilience is gradually being strained. The latest figures released this week also show that delinquency rates remain high. Against the backdrop of high living costs, improving affordability may become a key factor for the Republican Party in the 2026 midterm elections.

In this article, we will analyze the default risks in the U.S. housing market, focusing on credit cards, auto loans, and mortgages, and discuss whether these risks can remain manageable amid inflation crises, tariff shocks, and a K-shaped economy.

1. Credit Card and Auto Loan Delinquencies: High but Expected to Improve

First, we focus on the sharply rising delinquency rates in credit cards and auto loans, examining from two perspectives: overall leverage health and detailed delinquency data.

Overall Leverage Health: No Significant Pressure on the Private Sector

Despite widespread concerns about U.S. debt issues, it’s important to note that structural debt burdens are mainly concentrated in the government sector, not the private sector. According to the Federal Reserve’s semiannual Financial Stability Report, in recent years, corporate and household debt-to-GDP ratios have continued to decline. Household debt as a proportion of GDP has fallen to its lowest level since the 2000s; additionally, household debt payments as a share of disposable income remain at lows not seen in nearly 20 years. This indicates that the private sector’s leverage remains healthy, with no urgent need for deleveraging.

Delinquency Rates: Early Signs of Improvement Are Emerging

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                            Click questions to get answers from MM AI
                        

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                                            When will credit card and auto loan delinquencies improve?
                                        
                                        

                                            💡 Delinquencies in credit cards and auto loans are likely to see improvement this year. The rising trend in mild delinquencies has weakened, credit card delinquency rates have fallen across all income groups, and middle-to-high income auto loan borrowers have stabilized—these are leading indicators approaching a peak.
                                        

                                    

                                
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                                            Why is the private sector’s leverage healthy despite concerns?
                                        
                                        

                                            💡 The private sector’s leverage remains healthy because corporate and household debt-to-GDP ratios have continued to decline, with household debt at its lowest since the 2000s, and household debt payments as a share of disposable income staying at low levels for nearly 20 years.
                                        

                                    

                                
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                                            Why have U.S. mortgage delinquencies remained low over the long term?
                                        
                                        

                                            💡 U.S. mortgage delinquencies have stayed low mainly because the housing market demand stopped deteriorating and rebounded since 2023, inventory and vacancy rates are stable, and structural changes post-2008—such as stricter risk controls and reduced floating-rate borrowing—have contributed.
                                        

                                    

                                
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                                            How has the Fed’s rate cuts affected the housing market momentum?
                                        
                                        

                                            💡 As the 2024 rate cut cycle begins, data from MBA mortgage applications show that applications for home purchases and refinancing have been rising since 2025, indicating that rate cuts are effectively boosting housing market activity.
                                        

                                    

                                
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                                            What is the current situation of housing inventory and vacancy rates?
                                        
                                        

                                            💡 Although new home inventory is high, over 80% of existing home inventory remains at historically low levels, indicating a healthy overall housing market structure. Vacancy rates are stable, with the vacancy rate for homes for sale remaining at historic lows, and rental vacancy rates have recently slowed in growth but remain low.
                                        

                                    

                                
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                                            How do Trump administration policies impact the housing market and low- to middle-income families?
                                        
                                        

                                            💡 The Trump administration’s policies are shifting toward “Make America Affordable Again,” introducing favorable housing policies such as banning institutional investors from purchasing single-family homes and encouraging Fannie Mae and Freddie Mac to buy more MBS to suppress mortgage rates, helping stabilize home prices and support consumption among low- to middle-income families.
                                        



                
                
                

                

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