Housing Market: Increasing Consumer Debt Could Further Hinder Rebound as Americans’ Savings Dwindle

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Saving for the future is becoming much tougher as the $2.3 trillion in savings Americans set aside during the pandemic (largely due to stimulus payments and the boost in unemployment) is dwindling as inflation wages on, salaries fall behind and people dip into their reserves to pay bills. In particular, many homeowners have expressed worry about making mortgage payments on time and having to turn to savings or take on debt could have a grave effect on the country’s ability to rebound economically.

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Mortgage lending giant Fannie Mae conducted their National Housing Survey over the course of April through September 2022 to get a look at the state of household finances throughout the year and determine what most concerned homeowners going into 2023. What they found in September is 26% of respondents worried about being able to make upcoming mortgage or rent payments (this was eight percentage points up from 18% just five months prior in April).

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As well, by September, 28% expressed they had not been able to save money (which increased from 23% in April), and many worried they were close to depleting any savings they had built up.

In addition to housing, other items that many consumers were worried about being able to afford included food, fuel and medical care. More than a third of respondents feared being able to pay for those items in 2023.

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Another prominent component of Fannie Mae’s report was consumer trends with debt. Their survey showed a historically high number of people (35%) said they are “stressed” regarding making payments toward debt, particularly credit cards. That figure is 10 percentage points greater than when Fannie Mae posed the question in 2020 at the onset of the pandemic.

This, coupled with the fact that personal savings rates are now just 2.4 percent (typically ranging 7% to 9%), could have a large impact on the housing market and overall American economy. Not only does it put more mortgage holders at risk of potential default on their loans, but renters are also going to have a harder time saving for a down payment (and affording mortgages as interest rates continue to climb), negatively affecting the first-time homeowners pool which is essential to the health of the housing market.

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Casting the net wider, Fannie Mae said, “Consumers may soon cut back their spending to a greater degree, adding to risk of a recession occurring over the next year. If this were to occur, it would likely reduce demand for housing and provide lesser support for home sales, home prices and mortgage originations.”

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Not all experts seem as worried yet, however. A number of real estate analysts told GOBankingRates that “a sense of normalcy will return to the housing market” in 2023 as inventory becomes greater and people “warm” to higher interest rates.

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About the Author

Selena Fragassi joined GOBankingRates.com in 2022, adding to her 15 years in journalism with bylines in Spin, Paste, Nylon, Popmatters, The A.V. Club, Loudwire, Chicago Sun-Times, Chicago Tribune, Chicago Magazine and others. She currently resides in Chicago with her rescue pets and is working on a debut historical fiction novel about WWII. She holds a degree in fiction writing from Columbia College Chicago.
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