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5 Signs of an Impending Recession

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Is a recession imminent and will it drive more homeowners to consider a reverse mortgage? Before we tackle that topic first let’s examine some recent economic history. Over the duration of the pandemic Americans socked away a considerable amount of savings. However, that savings will likely be gone by the end of this year according to research from the Federal Reserve Bank of San Francisco.

Americans’ personal savings rate as measured by the percentage of one’s disposable income saved was 9.1% in January of 2020. By April 2020 that number soared to 33.8% thanks to stimulus payments, mortgage and rent forbearance programs, and generous unemployment benefit payouts. By November 2020 the index fell to 13.3% until it rebounded to 26.3% in March 2021 thanks to a third round of stimulus payouts from the American Rescue Plan Act. The aggregate amount of dollars saved follows a nearly identical track.

A Recession postponed

Fortune-com reports excess savings accumulated during the pandemic helped defy the expectations of a looming recession as consumer spending bolstered the economy. However, with nearly 90% of the savings having been spent and credit card balances soaring consumers are ill-prepared for an economic downturn. That’s especially true for Older Americans on a fixed income who no longer can finance their expenditures on their credit cards. What’s not reported is the hedge older homeowners have; an estimated $12.7 trillion in home equity ‘savings’ held by those 62 and older.

Credit card debt hits new high

Credit card delinquencies typically surge during a recession.  For example, in the years leading up to and during the housing and economic crisis of 2008 credit card delinquencies shot up from 3.54% to 6.77% in the second quarter of 2009. The number of Americans defaulting on their credit cards fell steeply as consumer spending slowed and the economy clawed its way out of the recession. Yet as consumers spent the last of their stimulus savings credit card balances and delinquencies are trending in the wrong direction.

How likely are we to see a recession in 2024?

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Editor in Chief: HECMWorld.com
 
As a prominent commentator and Editor in Chief at HECMWorld.com, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.
 
Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.
 
Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.

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3 Comments

  1. This is a repeat of the economic cycle we had in the 70’s recession ,stag flatiron and stock market downturns.

  2. We saw it in the 70s (as stated above), when the Prime Rate hit 22% then exploded in the 80s. We say it again in 2008. In each case, the bottom fishers (FHA/DPA) did well. I think the Reverse is prime for a wild ride! Yippee-ki-yo-ki-yay!


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