Americans Debt Struggle Impacting Housing


Source: Real Estate Witch COVID-19 Impact Survey, March 10, 2021

By Roy Urrico


Finopotamus aims to highlight white papers, surveys and reports that provide a glimpse as to what is taking place and/or impacting credit unions and other organizations in the financial services industry.


Both homeowners and renters still feel the financial impact of COVID-19 and one in four have missed a rent or mortgage payment — including 40% who missed three or more payments — since the pandemic began.


That is one of the revelations gathered from an online poll "Real Estate Witch COVID-19 Impact Survey" of 1,000 Americans on March 10, 2021, by St. Louis-based Clever Real Estate. Previously Clever surveyed Americans about their financial well-being at the beginning of the pandemic (March 2020), one month in (April 2020), and six months in (September 2020).


Generally, renters are struggling more financially during the pandemic than homeowners. Renters are 20% more likely to report living paycheck to paycheck during the pandemic, 37% more likely to have no emergency savings, and 92% more likely to receive food stamps than homeowners.


Last September, 62% of survey respondents reported they were living paycheck to paycheck. That number has held steady, with 62% of respondents reporting they are currently living paycheck to paycheck.


Some key insights from the survey:


· One in four homeowners and 26% of renters missed at least one rent or mortgage payment during the past year.

· Sixty-one percent of respondents have lived paycheck to paycheck at some point during the pandemic.

· Twenty-eight percent spent their emergency savings since the pandemic began; 22% spent their emergency savings prior to the pandemic; 51% never had emergency savings in the first place.

· Almost 60% of Americans have accumulated more debt since the pandemic began, with 38% taking on more than $3,000 in additional debt in the last year.

· Renters are 56% more likely to say they are worse off financially now.

· Forty-three percent of homeowners had plans to sell their home in 2020 or 2021 — but 65% delayed selling or decided not to sell altogether. Among homeowners who still plan to sell their home, 77% say they expect to list their property in 2021, suggesting that nationwide inventory might see a bump. Almost 70% believe it is currently a good time to purchase a home.


Data scientist Francesca Ortegren, lead researcher of the study, pointed out as more people run out of their emergency savings and are forced to take on more debt to cover expenses, they expect to see impacts on credit unions and banks in a few ways. She noted, people have less money in savings, so financial institutions will allocate less toward interest paid on savings accounts; and because folks are taking on more debt — sometimes in the form of personal loans, there will be additional interest paid into the credit union and bank over time.


Ortegren added. “However, many areas of the country are lifting restrictions as the vaccine is more widely available and, as a result, more jobs are opening. We can expect people’s finances and the economy to start to normalize in the coming months, which may reduce the number of Americans who are taking on debt and spending their savings.”


The country should also expect to see an increase in housing inventory — which means more homes sold, suggested Ortegren. “Banks and credit unions who offer mortgages should see a surge in mortgage loans in the coming months. What is more, home values are still very inflated, so those mortgages are going to be larger and, therefore, bring in more money for lenders.”


Until inventory rises, buyers must compete over a limited housing supply. Among people who still plan to sell their homes, 77% say they will list their properties before the end of 2021, with May, June, and September standing out as the most popular months. Still, it may be some time before all homeowners feel comfortable listing their homes. Nearly one-quarter of prospective home sellers (23%) plan to delay until 2022 or later.

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