More Americans Report Income Clawback: Survey Finds
While nearly 40% of Americans still have lower incomes than before the COVID-19 pandemic began a year ago, the number of those who have recovered has continued to grow and many of them they expect to increase their spending in the coming months, according to a TransUnion poll. published Tuesday.
Chicago’s credit reporting agency found 38% of Americans said their household income remained negatively affected by the pandemic – down significantly from 53% at the end of March 2020, just weeks after reporting of the World Health Organization COVID-19 a pandemic.
The study is based on an online survey of 2,995 adults from February 26 to March 1, the 16th survey conducted since March 2020. TransUnion called previous reports his “Financial Trouble Study”, but with it he renames them his “Consumers Pulse” reports.
Another change with this report is that TransUnion has grouped consumers by impact and perspectives formed as a result of COVID-19. The three main types that emerged were:
- Stable (35% of the population). Their income has not decreased and their finances are as expected.
- Optimistic (27%). Their income has gone down, but they think their finances will recover.
- In limbo (22%) Their income has decreased, but they say they are unsure or slightly doubtful that their finances will recover.
The other groups were:
- Resilient (8%). They have seen their income decline, but say their finances have recovered completely.
- Prosperous (5%). They had no drop in income and better finances than expected.
- Devastated (2%). Their income has gone down and they don’t think they’ll ever get over it.
- Struck financially (1%). These people say their household income has not been affected, but they say their finances are worse than expected.
Charlie Wise, head of global research and advisory at TransUnion, said there were signs in the data that Americans are increasingly optimistic and therefore more willing to spend more and borrow more for deferred purchases of big ticket items like travel, weddings, and automobiles. .
More than half (53%) of resilient consumers, 27% of successful consumers and 29% of hopeful consumers expect to increase their discretionary spending.
Wise said the group “in limbo” is the one to watch. As they hope for personal recovery, the chances and speed of a national economic recovery also increase.
However, at the start of March, 62% of people in limbo cut their discretionary spending, down from 45% overall, and 54% plan to cut their discretionary spending, down from 37% overall.
Still, Wise said the trends are favorable.
“We see a lot of optimism in the numbers regarding the level of consumer spending in the coming months,” said Wise.
On the other hand, he said lenders need to prepare for the “coming payment shock”.
Mortgage defaults are on the rise and many households are expected to implement 12-month forbearance plans from March to June. This will cause these households to suddenly lose much of their monthly cash flow. The risk is not that they fall behind on mortgage payments, but that they fall behind on unsecured loans or maybe auto loan payments, Wise said.
Credit cards remain the main barometer. “We really haven’t seen a slight increase in credit card defaults,” Wise said.
CoreLogic reported Tuesday that in December 5.8% of mortgages were at least 30 days or more past due, including those in foreclosure, up from 3.7% a year earlier. The severe delinquency rate – defined as being 90 days or more past due, including foreclosed loans – was 3.9%, up from 1.2% in December 2019.
The report from the Irvine, Calif.-Based housing analysis company said that “2020 has started with the lowest share of overall defaults (over 30 days late) since registration began. data in 1999, but as pandemic and shelter-in-place guidelines. spread, the rate doubled from 3.6% in March to 7.3% in May.
“While those initially affected by the pandemic and the recession that followed went through stages of delinquency, serious delinquency (over 90 days late) quadrupled from pre-pandemic rates, peaking in August, ”says the CoreLogic report.
The number of households with mortgage forbearance has decreased, but the Mortgage Bankers Association forborne mortgages reported on Monday accounted for 5.14% of the volume of the service agent portfolio as of March 7, or about 2.6 million homeowners.
MBA chief economist Mike Fratantoni said the abstention exit rate accelerated in early January, but remained well below the October and early November exit rates.
“Labor market data continues to point to weakness, meaning that many homeowners who remain unemployed will need continued relief in the form of forbearance,” Fratantoni said. “While new forbearance requests remain relatively low, the availability of relief remains a necessary support for many homeowners. “