Real Estate Homeowners and Savings
Personal savings increased to a 21% annual rate in the first quarter of this year, reaching the second-highest level on record, according to the Bureau of Economic Analysis. Many Americans saved cash from the federal government’s COVID-19 stimulus programs, and those who have remained employed have been able to save money after sheltering in for months, decreasing spending on gas, clothes, entertainment, and travel.
“Consumers have lots of cash available thanks to stimulus and extremely high savings and will be looking to spend, especially on services,” Gus Faucher, chief economist of PNC Financial Services, told MarketWatch. “Rising vaccination rates and a greater willingness to go out in public will also support consumer spending.”
The reopening of the economy and federal stimulus funds led to a 6.4% annual GDP gain in the first quarter, the government reported this week. “The economic recovery now is quicker and stronger compared to the recovery [following the Great Recession] thanks to a quick and powerful dose of monetary expansion and strong fiscal spending that propped up consumer and residential investment spending,” Gay Cororaton, research economist at the National Association of REALTORS®, writes for the association’s Economists’ Outlook blog. A strong housing market also likely will continue in 2021 with sustained economic growth, declining unemployment, and mortgage rates hovering at historic lows, Cororaton notes.
Consumer spending accounts for 70% of the economy. The National Association of REALTORS® predicts GDP growth to reach 4.5% in 2021, mortgage rates to average 3.2%, and existing-home sales to increase 10% to 6.2 million units.
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Updated: Boston Real Estate 2021
A Wells Fargo & Company (NYSE: WFC) quarterly survey found that nearly one in four homeowners (24 percent) do not have any savings to cover their living expenses should they lose their income. At the same time, anxiety over job stability increased significantly (from 21 percent to 29 percent indicating jobs as their top concern) since fourth quarter 2008, the last time the survey was done. Respondents also have a significantly higher desire to increase savings while reducing debt (60 percent versus 53 percent) and pay down debt faster (53 percent versus 46 percent) compared to the last survey. Less than a quarter of respondents (23 percent) have increased their savings, but 37 percent say they have paid down debt and 12 percent paid off debt completely in the past year.
Many people are taking drastic actions to reduce expenses. Since last year, one-third of homeowners (34 percent) say they have had family or friends move in with them, and 42 percent are spending less on their children. And, compared to a year ago, many have adjusted their spending. About two in five say that they are budgeting more or buying more of only what they need (39 percent and 41 percent respectively) and 30 percent say they are learning how to better manage their budgets on their own.
Asked what would boost their confidence in the economy, one in four say an improvement in their personal situation is the top indicator. Meanwhile, homeowners are waiting for the economy to improve to make a major purchase: 30 percent say the first purchase they will make will be home improvement, 18 percent say they will buy an automobile while 13 percent say they will take a vacation.