Will Americans’ Personal Finances Survive the Pandemic?

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Few have been spared from the wrath of the coronavirus, whether the impact felt was physical, emotional, or otherwise. New data out from Visual Capitalist delve into the toll the pandemic is taking on our personal finances.

Based on an analysis by doxoINSIGHTS, Visual Capitalist compiled the net effects of COVID-19 into an eye-opening graphic. Needless to say, it hasn’t been good.

Of course, we do need to take all of these types of studies, surveys, and statistics with a grain of salt. For example, back in April, The New York Times ran a piece claiming 31% of tenants could not pay their rent next month. Thankfully, that did not come to pass.

And while many states have eviction moratoriums in place right now—which when lifted, will almost certainly amount to a significant uptick in evictions and foreclosures—the 2008-like tsunami many were predicting is unlikely to come. Hopefully, the latest stimulus package that was passed will help tide Americans over (despite the pork in it) without contributing too much to the increased inflation that is bound to come.

Related: What Every Investor Should Understand About Inflation

That being said, although it’s worth pointing out the hyperbole and fearmongering out there, it’s no understatement to say the pandemic and lockdowns have hurt Americans badly. Visual Capitalist sums it up well noting:

• 57% of consumers’ incomes have taken a hit in the past seven months
• 70% have delayed discretionary spending on big purchases
• 75% continue to be very worried about their future financial health

Furthermore, it points out that,

“Unsurprisingly, worrying about personal finances also means that more Americans are deferring their bill payments during the pandemic. However, these vary depending on the type of bill, total amount, and immediate urgency.”

Here’s a chart illustrating those deferments:

Unfortunately, the analysis offers no baseline from previous years for comparison. Nor does it specify whether these payments were eventually made up (i.e., paid late) or permanently skipped. This has been extremely common among these sorts of reports.

Related: 9 Ways to Save Money You Have Probably Never Tried

One analysis from the National Multifamily Housing Council does keep running data, which makes it easier to compare. According to their information, in December 2019, 93.2% of tenants paid rent. In December 2020, it was 89.8%. (For November 2019 and 2020, the gap was closer—91.9% and 90.3% respectively.)

Sure, this is a noteworthy difference (3.4%), but it doesn’t qualify the scary headlines we have seen in many publications.

A more likely trend is that people are reducing their expenditures by dropping various services. DoxoINSIGHTS’ study also looked into whether people are likely to skip various payments in the future (or drop those services if they can).

I anticipate a lot of Americans will stop paying for their alarm, drop their health insurance or life insurance, or at least stop subscribing to things likes Hulu, Netflix, or Amazon Prime. Hopefully, these types of sacrifices will only be for the short-term, but we shall see.

Related: What the December Coronavirus Stimulus Might Mean for Real Estate Investors

I don’t expect 28% of Americans to miss their rent as the report suggests. But I do suspect many are worried about it, as they don’t have much in savings. Per the report, while about half of Americans have at least three months of savings, just over a third have less than one month’s worth.

Of course, this doesn’t take into account the ability of people to ask friends or family for assistance or receive charity or government help. Even still, it is highly concerning that a full 35% of respondents believe they have less than one month of savings.

Again, I urge caution with all of these surveys and studies coming out. The economy is unlikely to completely collapse. but we are likely to see inflation, slow growth, and a noteworthy increase in both foreclosures and evictions. Furthermore, the average American has taken a hit, many small businesses have been hurt badly or gone under, and wealth inequality has increased substantially, which will likely continue to increase political instability.

In other words, while things are better than they were in April, things still aren’t good. I would definitely not tell people to simply sit on the sidelines and wait right now. But as I recommended back in April, it’s still wise for real estate investors to proceed with caution.

What statistics have you encountered surrounding the impact of COVID-19 on Americans’ wallets? Were the claims believable or blown out of proportion?

Share your thoughts in the comment section below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.