Household Finances Still Under Stress Three Years into Housing Recovery

More than three years into the nation’s economic recovery, American household budgets are still under stress, according to the latest findings of the CredAbility Consumer Distress Index.

In the first quarter of 2013, U.S. households scored 70.7 on the Index’s 100-point scale, down 1.1 point from the previous quarter. A score below 70 indicates a state of financial distress, according to CredAbility’s Index. 

The newest causes for concern leading to the first quarter decrease have been attributed to significant drops in the savings rate and consumer sentiment.

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Additionally, increases in Social Security taxes have also impacted the Index’s reading, as more households had been forced to save more and spend less compared to the previous quarter. 

“Despite growth in jobs and an improved housing market, our index shows that the average U.S. household has seen little improvement in the past year and took a step back in 2013’s first quarter,” said Phil Baldwin, chief executive officer for CredAbility. 

The Index tracks the financial condition of the average U.S. household by measuring five categories related to employment, housing, credit, how families manage household budgets and net worth. 

Four of these five categories rose during the quarter, with the credit category exceeding 90 for the first time in 24 years—a clear sign that consumers continue to pay their credit cards and other consumer loans on time, according to CredAbility.

The net worth category, while remaining well below 70, reached its highest point since the beginning of the financial crisis and has risen nearly five points in just over four years.

On local and state levels, Florida was the only state to report a gain during the quarter, following improvements in employment and mortgage delinquency rates in the Tampa, Orlando and Jacksonville areas. 

Among the 30 largest metropolitan statistical areas (MSAs), households in Minneapolis-St. Paul, Boston, Washington, D.C., Houston and Dallas were the five cities with the healthiest finances.

Written by Jason Oliva

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