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Consumer Stress Holding Steady Amid Price Increases

LegalShield, a pre-paid legal services provider, has released its most recent iteration of its Consumer Stress Index which shows that consumer stress remained steady over the course of October, even in light of rising rent and housing costs and the expiration of federal assistance programs. 

In September, LegalShield found that chaos in the markets caused by the COVID-19 Delta Variant continued to play a role in consumer stress, mainly in the areas of employment and tenant issues, based on the types of services Legal Shield rendered to its customers. 

These sentiments remained subdued and carried over to October when the index gained a meager 0.9 percentage points, during a month that saw consumer prices rise by an average of 6.2%. Consumers that have concerns about their financial situation as protections come to an end are more likely to experience higher stress and therefore will decrease their spending to help alleviate their situation. 

“Our data reveals that members are shifting their focus away from real estate and home purchases and toward consumer finance, employment, and landlord/tenant advice from our network of law providers. There’s more pressing matters on their minds with rising inflation, federal aid, and loan and eviction moratoriums expiring,” said Jeff Bell, CEO of Pre-Paid Legal Services Inc. (PPLSI), parent company of LegalShield. 

LegalShield also pointed out that supply chain problems has caused its Housing Construction Index to fall again in October. Over the course of the month, the index fell 7.8 points after falling 7.7 points in September. The shortage of available lots and building materials is unlikely to improve on a short-term basis, according to the report. 

Other key findings noted by the report: 

LegalShield Bankruptcy Index 

  • Bankruptcies continue to hover at all-time lows. The LegalShield Bankruptcy Index increased (worsened) 0.6 points to 19.5 in October, and total seasonally adjusted bankruptcy filings fell by 0.9% to 30,703 in September and were down 19% compared to a year ago. 
  • Increased government support during the pandemic has provided consumers with a cushion and kept bankruptcies muted. As the economy continues to normalize, bankruptcies may rise next year. 

LegalShield Foreclosure Index 

  • The Foreclosure Index inched up in October and remains virtually unchanged and near historically low levels. 
  • Despite foreclosure filings having doubled year-over-year, they remain 70% below the levels from two years ago, highlighting the effect of pandemic-related assistance programs and legislation. 
  • In stark contrast to other recessions, home values have skyrocketed since the beginning of the pandemic leading to high levels of equity for many homeowners; CoreLogic reports that homeowners have gained an average of $51,500 in equity in the second quarter of 2021, five times of the gain from the same period one year prior. 

LegalShield Housing Sales Index 

  • For the first time in six months, the Housing Sales Index declined sharply. Despite existing home sales rising 7% in September to an eight-month high, the level is still over 2% lower than year-ago levels. 
  • The rapid rise of home prices is pressuring buyers out of the market; well-capitalized buyers are making all-cash offers and making it much more difficult for those that need financing to win a deal. This has pushed first-time homebuyers out of the market, where they account for the lowest share of sales in six years, according to the National Association of Realtors. 
  • With interest rates likely to rise in the coming quarters, increasing mortgage rates will continue to dampen demand moving forward. 

About Author: Kyle G. Horst

Kyle Horst
Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at kyle.horst@thefivestar.com.
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