Best Credit in Years Stokes Big Life Decisions

Flush balance sheets are propelling consumers to move, buy homes and have babies.

Consumer Balance Sheets Strongest in Years

According to Matthew Mish, a credit strategist with UBS Group AG, “From a credit perspective, the consumer is the best we’ve seen in years.”

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Many households have more financial wherewithal than they’ve had in years.  Here are four reasons:

• Households are spending less of their disposable incomes on debt. According to the Federal Reserve, the debt-to-income ratio is the lowest since the 1980’s, at least.
• Home values and stock portfolios have been climbing since the pandemic onslaught. This translates into a reduction in the liability-to-asset ratio.  This reduction in liabilities has led some people to achieve higher incomes.
• Consumer debt as a percentage of GDP is well below peak levels seen in 2010
• Percent of consumers likely to “take on big life events” in next 12 months higher than pre-pandemic

Consumers Are Planning Ahead

In a recent UBS survey, Americans reported feeling they’re more able financially to “take on big life events” than they were before the onslaught of the COVID pandemic.

Definitions of “big life events” are below, as well as the percentages of people willing to “go for it” and their “go for it” timelines over the next 12 months.

Pay attention, agents.  Many of these “big life events” have potential implications for your businesses.

1. Look for a new job
   1. 3-year pandemic average: 13%
   2. December 2020: 20%
   3. June 2021: 16%
   4. September 2021:16%
2. Move to a new community
   1. 3-year pandemic average: 10%
   2. December 2020: 13%
   3. June 2021: 11.5%
   4. September 2021: 16^
3. Have children or adopt children
   8. 3-year pandemic average: 8.5%
   9. December 2020: 17%
   10. June 2021: 15%
   11. September 2021: 13%
4. Move in with friends/relatives
   1. 3-year pandemic average: 8%
   2. December 2020: 18%
   3. June 2021: 18%
   4. September 2021: 15%
5. Retire
   7. 3-year pandemic average: 7.5%
   8. December 2020: 13%
   9. June 2021: 11%
   10. September 2021: 11%
6. Get divorced or separated
   1. 3-year pandemic average: 5%
   2. December 2020: 13%
   3. June 2021: 12%
   4. September 2021:10%
7. Get engaged
   8. 3-year pandemic average: 8.75%
   9. December 2020: 10%
   10. June 2021: 8.75%
   11. September 2021: 10%
8. Get married
   1. 3-year pandemic average: 6%
   2. December 2020: 5%
   3. June 2021: 5%
   4. September 2021: 6%

According to UBS’s Mish, any and all of these intentions “generally” spur more borrowing and consumption…and home buying and selling.

Thanks to Bloomberg.