Rising Consumer Debt: What It Means for Builders
Among all the categories of household debt—mortgages, auto loans, credit cards, student loans, personal loans, and HELOCs—credit card balances showed the most concerning trajectory. Total credit card debt reached $1.21 trillion by the close of 2024, a figure that represents a 7.2% year-over-year increase and a striking 30.6% increase from pre-pandemic levels in 2019. In inflation-adjusted terms, real credit card debt was reported at $381.29 billion, nearly matching the levels seen during the aftermath of the 2008 financial crisis.
This data point signals a return to high revolving debt burdens not seen since Q2 2009, a period characterized by sharp contractions in consumer spending and credit availability. For construction firms, this is not merely a financial statistic—it is a frontline economic indicator with tangible implications.
The increase in credit card debt may indicate households relying more heavily on high-interest borrowing to meet routine expenses. As the average credit card interest rate has risen significantly over the past two years—often exceeding 20% APR—borrowers are finding it harder to pay down balances, let alone finance large expenditures such as home renovations, additions, or new home purchases.
The compounding effect of elevated interest rates and increased balances erodes consumer creditworthiness. For builders and contractors who offer in-house financing or partner with lenders to provide flexible payment options, the rise in unsecured debt could result in:
- Higher loan default rates for client-financed projects
- Reduced eligibility for home equity borrowing among target customers
- Delayed purchasing decisions for discretionary projects
- Smaller project scopes as homeowners scale back budgets
- Greater demand for installment-based payment models or deferred financing plans
To adapt, construction businesses must remain alert to fluctuations in both credit access and borrower behavior. Emphasizing projects with secured funding, institutional lending, or public-sector support may become more prudent during periods of credit tightening.
Struggling with client financing concerns? Get insights in your BPA
Strategic Responses for Construction Leaders Amid Shifting Debt Trends
Although rising consumer debt, particularly in revolving credit, poses challenges, proactive construction companies can take advantage of the current conditions by shifting marketing, client engagement, and financial planning strategies. The following approaches can help mitigate risk and capitalize on evolving market dynamics:
- Focus on Financially Resilient Demographics: Prioritize marketing to client segments with higher credit scores, stable income, or substantial home equity. These consumers are less affected by short-term debt stress and more likely to proceed with large-scale projects.
- Strengthen Partnerships with Financing Institutions: Collaborate with lenders that offer construction-specific financing products or promotional terms. This can help mitigate client concerns about upfront costs or volatile interest rates.
- Adapt Offerings to Budget-Conscious Consumers: Introduce scalable or phased project options that allow clients to spread costs over time. Providing design-build packages with clear price transparency can also enhance trust.
- Educate Clients About Value and ROI: Reinforce the long-term value of renovation or energy efficiency upgrades. Clients may be more inclined to invest when they understand the cost-saving or resale advantages associated with their projects.
- Monitor Regional Debt and Income Trends: Not all regions experience the same debt pressure. Construction firms should monitor state-level or metro-specific debt ratios and consumer behavior to align services with local conditions.
By adjusting strategy to match the new financial realities of clients, construction businesses can reduce exposure to risk while preserving pipeline stability and profitability.
Want tailored strategies for uncertain markets? Your BPA can help
Implications for Housing Demand and Future Growth
The long-term implications of elevated household debt are multifaceted, especially for residential construction businesses. Mortgage debt, which makes up the largest portion of household liabilities, has remained relatively steady in both nominal and inflation-adjusted terms. However, access to new mortgage credit is tightening due to elevated interest rates and stricter underwriting standards. As a result, fewer first-time buyers are entering the market, and existing homeowners are more hesitant to move, creating a slowdown in overall housing turnover.
In tandem, rising unsecured debt—especially when combined with stagnant wage growth in many sectors—may reduce the willingness of consumers to take on new obligations, including remodeling loans or discretionary upgrades. This trend could affect project backlogs and reduce the number of homeowners undertaking mid-tier improvements such as kitchen remodels, bathroom upgrades, or accessory dwelling unit (ADU) construction.
On the other hand, certain sectors may benefit. For example, demand for multigenerational housing, room additions, and energy-efficient retrofits is expected to remain strong as households seek ways to consolidate living expenses and improve home functionality. Construction companies that align their service offerings with these trends are more likely to maintain steady revenue streams, even in high-debt environments.
In response to these evolving market conditions, construction leaders are increasingly turning to strategic planning tools that support operational efficiency and revenue stability. One such resource is the Business Diagnostic & Plan of Action (BPA) provided by Small Business Growth Partners. Tailored specifically to homebuilders, remodelers, and trade contractors, the BPA delivers a comprehensive, data-driven analysis of a company’s internal systems, identifying growth barriers and actionable steps for improvement. As a member benefit available through many industry associations, the BPA offers significant value—often exceeding $4,000—at no additional cost to eligible firms. In a climate where margin protection and workflow alignment are critical, leveraging a BPA can offer construction business owners a competitive advantage grounded in practical execution.
From a policy standpoint, any government intervention aimed at reducing interest rates or providing mortgage relief could revive housing demand and spur new building activity. Until then, however, companies must manage expectations, streamline operations, and protect margins by planning for a moderate-growth environment over the next 12–18 months.
