More Americans Report Income Recovery: Survey Reveals
TransUnion survey finds signs that spending and borrowing is poised for an increase in coming months.
While nearly 40% of Americans still have lower income than before the start of the COVID-19 pandemic a year ago, the number who has recovered continued to grow and many of them expect to increase spending in the months ahead, according to a TransUnion survey released Tuesday.
The Chicago credit reporting agency found 38% of Americans said their household income remains negatively impacted by the pandemic – significantly down from 53% in late March 2020, just weeks after the World Health Organization declared COVID-19 a pandemic.
The study is based on an online survey of 2,995 adults conducted Feb. 26–March 1, the 16th survey conducted since March 2020. TransUnion called previous reports its “Financial Hardship Study,” but with this one it is renaming them its “Consumer Pulse” reports.
Another change with this report is that TransUnion grouped consumers by impact and outlook formed as result of COVID-19. The three primary types that emerged were:
- Stable (35% of population). Their income has not decreased, and their finances are as planned.
- Hopeful (27%). Their income has decreased, but they believe their finances will recover.
- In Limbo (22%) Their income has decreased, but they say they are unsure or slightly doubtful their finances will recover.
Other groups were:
- Resilient (8%). They saw their income decrease, but say their finances have fully recovered.
- Thriving (5%). They had no income drop and better-than-planned finances.
- Devastated (2%). Their income decreased and they don’t think they’ll ever recover.
- Financially hit (1%). These people say their household income has not been impacted, but they say their finances are worse than planned.
Charlie Wise, TransUnion’s head of global research and consulting, said there are signs in the data that show Americans are becoming more hopeful, and thus more willing to spend more and borrow more for delayed purchases of big-ticket items like trips, weddings and automobiles.
More than half (53%) of resilient, 27% of thriving and 29% of hopeful consumers expect to increase discretionary spending.
Wise said the “in-limbo” group is the one to watch. As they become more hopeful of personal recovery, so too grow the chances and speed of a national economic recovery.
However, as March began, 62% of in-limbo individuals cut back on discretionary spending, compared with 45% overall, and 54% expect to decrease discretionary spending, compared with 37% overall.
Yet, Wise said the trends are favorable.
“There’s a lot of optimism we’re seeing in the numbers about the level of consumer spending in the coming months, Wise said.
On the other hand, he said lenders need to prepare for “the upcoming payment shock.”
Mortgage delinquencies are rising and many households are expected to roll off 12-month forbearance plans from March through June. That will cause those households to suddenly lose a large chunk of their monthly cash flow. The risk is not that they’ll fall behind on mortgage payments, but that they’ll fall behind on unsecured loans or perhaps automobile loan payments, Wise said.
Credit cards remain the chief barometer. “We really haven’t seen an uptick in credit card delinquencies,” Wise said.
CoreLogic reported Tuesday that as of December 5.8% of mortgages were delinquent by at least 30 days or more including those in foreclosure, up from 3.7% a year earlier. The serious delinquency rate – defined as 90 days or more past due, including loans in foreclosure – was 3.9%, up from 1.2% in December 2019.
The report by the housing analytics company based in Irvine, Calif., said “2020 began with the lowest share of overall delinquencies (30+ days past due) since data recording started in 1999, but as the pandemic and shelter-in-place directives spread, the rate doubled from 3.6% in March to 7.3% in May.
“As those initially affected by the pandemic and ensuing recession transitioned through stages of delinquency, serious delinquencies (90+ days past due) increased four-fold compared to pre-pandemic rates, peaking in August,” the CoreLogic report said.
The number of households with a mortgage forbearance has been declining, but the Mortgage Bankers Association reported Monday that mortgages in forbearance accounted for 5.14% of servicers’ portfolio volume as of March 7, or about 2.6 million homeowners.
MBA chief economist Mike Fratantoni said the rate of exits from forbearance picked up in early January, but remains much lower than exit rates in October and early November.
“Job market data continue to indicate weakness, and that means many homeowners who remain unemployed will need ongoing 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.”