In this article, we will list 15 US states with the least debt per capita. If you want to skip our discussion about rising interest rates and their effect on the housing market, go to 5 US States with the Least Debt Per Capita.
The rising inflation throughout the world has resulted in a global tightening cycle. Major central banks worldwide raised their interest rates and took other measures to decrease the money supply. This tightening cycle aims to keep commodity prices in check and bring some price stability. It has been unprecedent in terms of its size, speed, and synchronicity. However, one often neglected channel proves to be very important among the rising interest rates: private sector debt.
Although debt levels in the United States started to fall during the Global Financial Crisis, they are still at a historic high. In fact, debt levels throughout the world have been on the rise. The global debt reached a whopping $307 trillion in the third quarter of 2023. For perspective, the world debt level was $289 trillion in the third quarter of 2022. Amid this high debt and rising interest rates, households and firms in the country are extremely vulnerable. This vulnerability is most apparent in the housing market of the country. House owners in the country are finding it increasingly difficult to sell their houses because they will have to borrow at higher interest rates to buy a new house.
This has created a housing shortage in the United States, and median housing prices continue to rise. According to The State of Nation's Housing Report 2023, published by Harvard, there has been a decrease in first-time home buying. The report also mentions that the median total monthly payment for a house reached $3,000 in March 2023, up by 20% compared to March 2022. This increase in monthly ownership cost can be attributed mainly to the interest rates.
Amid the rising house ownership cost, many companies are offering affordable solutions for housing borrowers. One such company is Rocket Companies, Inc. (NYSE:RKT). The company has disbursed more than $1.6 trillion in home loans and launched a Rocket Visa Signature Card, which assists US home buyers. The Rocket Visa Signature Card by Rocket Companies, Inc. (NYSE:RKT) earns 5X points on all purchases the homeowners make. These points are redeemable on closing costs and downpayment by homeowners who have mortgages serviced by Rocket Companies, Inc. (NYSE:RKT).
Another player in the market is LoanDepot, Inc. (NYSE:LDI). It is an equal housing lender and digital commerce company that helps customers during their home ownership journey. LoanDepot, Inc. (NYSE:LDI) is one of the largest non-bank retail mortgage lenders in the country. It offers a variety of loan products ranging from buydown options and zero down payment. LoanDepot, Inc (NYSE:LDI) recently undertook a strategic partnership to cater to the needs of a wider audience as it became EXIT Realty Corp. International’s strategic partner.
An American mortgage company, United Wholesale Mortgage (NYSE:UWMC), recently offered no-cost appraisal. This facility by United Wholesale Mortgage (NYSE:UWMC) will enable independent mortgage brokers to build better relationships with the country's real estate agents and borrowers. The company reported on November 15, 2023, that it will be covering appraisal costs on all conventional and government home loans. United Wholesale Mortgage (NYSE:UWMC) will provide this facility to all independent mortgage brokers who utilize the company's 1-0 Temporary Rate Buydown product.
Methodology
To curate our list of 15 US States with the least debt per capita, we used household debt and government debt per capita data compiled by Forbes Advisor. For each state, we summed both these figures to arrive at total debt per capita. We selected the bottom 15 states for our article.
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15 - Nebraska
Total Debt Per Capita - $55,738
Nebraska is one of the US states with the least debt per capita. Interestingly, the state has one of the highest government debt per capita in the US, which is more than $8,000. However, it also has one of the lowest household debts per capita in the country at about $47,500. The combination of these two debts lands Nebraska at 15th position on our list. It is worth noting that one of the rising concerns in the state is rising levels of student debt.
14 - Wisconsin
Total Debt Per Capita - $55,244
As of 2023, Wisconsin's government debt per capita is a little above $8,400. However, at about $46,790 per capita, it has one of the lowest household debts, landing the state in 14th position on our list. The high government debt in the state is owed to the need to replace aging infrastructure and update IT systems.
13 - New Mexico
Total Debt Per Capita - $54,010
New Mexico is 13th on our list of the 15 US states with the least debt per capita. Its government debt per capita is $7,300, and household debt per capita is a little over $46,700. New Mexico implements the Patients' Debt Collection Practises Act. According to this act, the government prevents hospitals from sending medical bills to patients who fall at or below the 200% poverty level. The act also requires healthcare providers to offer financial assistance programs and provide information about public insurance and other methods that may assist patients with their medical bills.
12 - Missouri
Total Debt Per Capita - $53,946
Ranking 12th on our list of the 15 US states with the least debt per capita, Missouri has one of the lowest household debts per capita in the United States. However, it is interesting to note that at more than $8,000, it has one of the highest government debts per capita in the country. Some of the factors contributing to debt in the state include state bonds and unfunded pension benefits. Missouri's cost of living is relatively affordable compared to other states, which acts as a contributing factor in the state's low household debt per capita.
11 - Michigan
Total Debt Per Capita - $53,639
Michigan is 11th on our list of 15 US states with the least debt per capita. Its government debt per capita is similar to Missouri and the difference in the two state's household debt per capita is also insignificant. While household debt in the state remains low, student debt is one of the rising concerns. However, the state has been recognized as having the best economy, among all states since the COVID-19 pandemic, by Bloomberg. This significant economic progress since COVID-19 has positively impacted its overall household debt levels.
10 - Indiana
Total Debt Per Capita - $53,397
Indiana is one of the top 10 US states with the least debt per capita. It has one of the lowest government debts per capita in the country. The state is known for prudent fiscal policy management, which helps keep the total debt per capita low. In 2018, Indiana's long-term liabilities were at 50% of the total assets, which was lower than the national average at the time. Many analysts also appreciate the state for its responsible fiscal management, which has resulted in relatively stable fiscal and financial health.
9 - Kansas
Total Debt Per Capita - $52,875
Ranking 9th on our list of 15 US states with the least debt per capita, Kansas has one of the lowest household debt per capita, which stands at a little above $43,400. However, it is worth noting that the state has one of the highest government debt per capita at around $9,400. While Kansas has used debt moderately compared to the overall US states, it has been more aggressive than the surrounding states. Its unfunded pensions are also high relative to the GDP, contributing to the higher government debt.
8 - Iowa
Total Debt Per Capita - $52,688
At a little less than $7,000, Iowa has a moderate government debt per capita. One of the reasons for its low debt per capita is the fact that the state's constitution limits the debt of each political subdivision to 5% of the value of taxable property in it. In addition, a pay-as-you-go approach is prevalent in the state as opposed to borrowing. The state is known for its commitment towards debt and its limitations on the type of debts that can be issued.
7 - Louisiana
Total Debt Per Capita - $52,492
Louisiana ranks seventh on our list of 15 US states with the least debt per capita. At just above $6,600, the state has a moderate government debt per capita in the country. The state is known for its conservative borrowing practices and a focus on balanced budgets.
6 - Kentucky
Total Debt Per Capita - $52,302
Kentucky ranks sixth among the 15 US states with the least debt per capita. Interestingly, the state has an extremely high government debt per capita of more than $12,000. However, it's one of the lowest household debts per capita keeps the overall debt per capita in check. The state has a significant debt burden compared to others, and there are concerns regarding its aggressive borrowing despite rising interest rates.
