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Financial Stress Falls as Housing Strength Grows

money in the pocket

With consumers facing low financial stress and a recession unlikely in the near future, the industry should see continued strength in homebuilding and low foreclosure activity for the first part of this year, according to the Q4 2019 LegalShield Law Index. However, the index does not offer much optimism in the way of existing home sales. 

Consumer financial stress reached an all-time survey low, according to LegalShield, which has been providing data for more than 15 years. The Financial Stress Index fell 5.1 points to 68.9 during Q4 2019. 

LegalShield pointed to the “robust labor market,” and “lowest unemployment levels in decades” as sources of confidence for consumers and said, “Overall, consumers should remain on solid footing in the beginning of 2020.” 

The unemployment rate reported by the Bureau of Labor Statistics for the month of November was 3.5%, on par with the rate reported a year earlier. 

Homebuilding activity declined in Q4 2019 but is still strong, prompting LegalShield to predict a strong first half of 2020 in housing. The organization’s Housing Activity Index dropped 5.8 points to 111.0, which is 1% higher than the same quarter a year earlier. 

Similarly, homebuilder confidence, as tracked by the National Association of Builders and Wells Fargo, fell in the most recent reading but remains high. In fact, in the last two months the index posted the highest readings on record since July 1999. 

There’s optimism around foreclosures too. LegalShield’s Foreclosure Index dropped 1.4 points to 47.9 following a 35-year low for foreclosure starts in Q3 2019. The foreclosure start rate in Q3 2019 was a meager 0.21%, according to LegalShield. 

ATTOM Data Solutions reported the foreclosure rate for the year in 2019 was 0.36%. 

“Although housing affordability remains an issue in some parts of the housing market, consumers continue to demonstrate excellent home-loan payment behavior,” LegalShield reported. 

The optimism, however, did not persevere in the existing home sales front. 

Scott Grissom, SVP and Chief Product Officer at LegalShield, said, “However, LegalShield’s data, in combination with market conditions, show that existing home sales (including starter homes) have been especially sluggish, reflecting both low levels of supply and elevated home prices as reasons for not entering the market.”

The LegalShield Real Estate Index fell to its lowest level in five years in Q4 2019. The index declined 7 points to 95.9 in the quarter. 

Meanwhile, the National Association of Realtors reported Wednesday existing home sales rose 3.6% in December after taking a dip in November. Existing home sales rose 10.8% over the year in December. 

As the December data was released after LegalShield released its report, LegalShield pointed to November’s dip as further evidence that “a significant improvement in existing home sales is unlikely in the coming months.” 

In another positive sign for consumers, the LegalShield Bankruptcy Index remained near historically low levels, although it did increase just slightly to 48.1 in Q4 2019. 

LegalShield predicts consumer confidence will continue its strength and we will not encounter a recession this year. 

About Author: Krista F. Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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