Clark County’s debt-to-income ratio high

Do you still have a lot of debt, even though you make a good income? If so, consider yourself normal. Despite growing wages, Clark County’s debt-to-income ratio remains one of the highest in the Portland metro area.

The latest data put Clark County’s ratio at 2.528 at the end of last year, more than the state average at 1.5. In other words, if a household brings in $100,000 in annual income, it probably owes more than $250,000 to creditors.

It’s been that way for the past decade, according to U.S. Federal Reserve Bank data.

Clark County residents are worse off than residents of Multnomah County, Ore., where the debt-to-income ratio was 1.167, or Washington County, Ore., 1.329 at the end of last year. But the debt-income ratio in Clackamas County, Ore., was 2.664; Columbia County, Ore., 5.166; Skamania County, 6.313; and Cowlitz County, 1.970.

The relationship between debt and income isn’t straightforward, local economist Scott Bailey said. Monthly loan payments, household assets and interest rates all play a role.

But “in general, higher debt-to-income levels indicate more stress on households — more income goes to debt payments than to food, clothing, etc.,” Bailey said.

Household debt nationwide reached $18.39 trillion in the second quarter of this year — a 20-year high, according to data from the Federal Reserve Bank of New York. Housing made up the biggest bulk of that debt, $13.35 trillion, followed by car loans, student loans and credit cards.

Clark County’s wages have grown consistently over the years, from about $53,000 on average annually in 2018 to about $69,000 in 2023, according to data from the Washington Employment Security Department.

The county’s median home price, however, also has continued to climb.

Banks generally calculate debt-to-income ratio by adding up a household’s debt and dividing that by its monthly income, then multiplying it by 100.

A typical healthy ratio is less than 35 percent, said Evan Sowers, president and CEO of the Riverview Trust Co., a financial-planning subsidiary of Vancouver-based Riverview Bank. The higher the ratio goes, the more a household needs to look at increasing its income or lowering its debt, he said.

When it comes to the county data, Sowers said it’s a multidimensional discussion.

“One of the big, in my mind, driving factors is the housing affordability,” he said.

A family renting a $2,000 two-bedroom apartment in Clark County would need to earn $80,000 per year to stay within that healthy ratio, Sowers said. And that’s already at the upper limit.

“That just doesn’t leave a ton left over for household expenses — food, utilities, anything else you’ve got going on,” he said. “I think that’s where we’re really feeling the squeeze.”

King County is notoriously expensive, but the Federal Reserve data shows its debt-to-income ratio was 0.996 at the end of last year.

Sowers pointed to that county’s higher incomes as a possible explanation.

“When you look at debt-to-income just at a really, really high level, that income is a big factor,” he said.

More expensive urban areas often have greater median incomes, Sowers said.

Clark County’s debt-to-income ratio isn’t as bad as in other places, however, he added, pointing to the higher rates in Skamania and Columbia counties.

The Federal Reserve’s data looked at a 5 percent random sampling of Americans with credit files at Equifax, a credit reporting bureau, while the income data came from the Bureau of Labor Statistics.

The counties with the top 25 percent debt-to-income ratios exceeded Clark County’s, Sowers said.

He thinks some of those more rural counties just haven’t caught up on the income side.

“Maybe that’s what’s driving that calculation,” he said.

Sarah Wolf: 360-735-4513; [email protected]