“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: Bankruptcies last year rose locally and nationally for the first time since 2010.

Source: American Bankruptcy Institute

The Trend

Last year, 36,931 individuals and companies filed for protection from creditors in U.S. Bankruptcy Court’s Central California district, an increase of 2.7% compared with filings in 2018. U.S. bankruptcies also increased, but by only 0.3%. Statewide, there were 67,148 filings in the same period, up 1% in a year.

The Dissection

The mild uptick in filings may be tied to last year’s modest cooling of the economy, regionally and nationally, hitting hardest folks who bet on boom-like days continuing.

Volatility in several notable industries — construction, retail, energy and agriculture — added to the challenges for some of balancing a household checkbook or making a company payroll.

The bankruptcy filing increases in the local district — which includes Los Angeles, Ventura, San Luis Obispo, Santa Barbara, Orange, Riverside and San Bernardino counties — was roughly equally borne by individuals (up 2.7%) and business owners (up 2.9%). Nationally, business filings were up 2.4% compared with a 0.2% rise in individuals’ filings.

Sign up for The Home Stretch newsletter and its new Bubble Watch edition. Get a twice-a-week serving of hot housing news from around the region! Subscribe here.

Rising bankruptcies are not just a Southern California issue.

Of the 94 bankruptcy court districts nationwide, 21 had bigger percentage jumps in filings than Southern California in 2019. The top three increases were in east Texas, Hawaii and mid-Florida.

And 17 states had larger increases than California. Three largest jumps? Hawaii, Florida and Nevada.

Another view

The region’s bankruptcies are low relative to elsewhere in the nation.

Local bankruptcy court’s share of all U.S. filings is down. Last year’s local filings equaled 4.9% of the 757,393 filings nationwide. Since 2007, bankruptcies in the local district have been 6.7% of filings nationwide.

And on a per-capita basis, filings as measured by population, California ranked 30th among the states last year. Tops? Alabama, then Tennessee and Georgia.

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … TWO BUBBLES!

You can’t totally ignore any uptick in bankruptcies, even if it follows a downtrend of eight years following the Great Recession. That’s especially true in Southern California where overspending and wild risk-taking are part of the culture.

But let’s also not forgot that once the financial hangover of the recession wore off, bankruptcies have dropped sharply. Since 2015, Southern California averaged 38,974 filings yearly. That’s down 59% from the dark days of 2008-14. Nationally, bankruptcies are down 37% in the same period.