U.S. Consumer Struggles Grow, 6 Months Into COVID-19 Pandemic

U.S. Consumer Struggles Grow, 6 Months Into COVID-19 Pandemic

Survey: 61% have run out of savings or will do so by the end of the year
The Statue of Liberty wearing a mask

For those hoping the pandemic would have a short-term impact on American life, new research is proving them wrong.

Roughly six months after the COVID-19 outbreak was classified a pandemic on March 11, 61% of consumers had either run out of savings or feared their emergency savings would be empty by the end of the year, according to a survey and related research from homebuying platform Clever Real Estate.

With consumers struggling to pay bills and taking on additional debt, the pandemic’s effects may be felt for years.

Consumers dealing with loss of income

The pandemic has created a wave of economic challenges since the beginning of the year. The September unemployment rate (released Oct. 2) stood at 7.9%, up sharply from 3.6% in January before the pandemic began.

With more Americans out of work, it’s not surprising that many are experiencing financial woes. According to the Clever Real Estate survey, fielded in early September, nearly three-fourths of consumers (74%) are racking up credit card debt, running through their savings and/or cutting their budgets in order to handle their day-to-day expenses.

More specifically:

  • 18% of respondents said they were taking on more credit card debt in September, compared with 8% recorded in a separate April survey from Clever Real Estate
  • 25% of respondents said they were taking on more non-mortgage debt due to the pandemic
  • 54% of those already in debt said they borrowed an additional $2,000 or more during the coronavirus outbreak

On top of that, more than half of respondents (62%) said in September that they were living paycheck to paycheck, compared with 54% who said the same in April, and up from 49% before the pandemic began.

Housing troubles abound

Homeowners and renters are also having challenges, the survey found. Some homeowners have been able to defer their mortgage payments under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. According to the survey, 46% of homeowners who deferred payments were now at least $2,000 behind in payments.

Among renters surveyed, a third (33%) said they had missed or deferred at least one rent payment since March, while among homeowners, 19% had missed or deferred payments. Overall, renters appeared to be struggling more, as 72% of renters said they were currently living paycheck to paycheck, compared with 55% of homeowners.

A likely reason behind the difference was that 30% of renters reported not having stable income, double the 15% of homeowners who said the same. These findings were in line with an earlier survey describing some of the challenges renters were facing throughout the pandemic.

Meanwhile, 78% of homeowners said they were saving for retirement, twice the proportion of renters who were doing so.

The survey also found a difference between the two groups in terms of where they were turning for help. Renters struggling to cover everyday expenses were more likely to raid their retirement accounts, sell personal items, work side jobs, move and/or borrow from family and friends to meet their obligations. In contrast, homeowners were more likely to take on more credit card debt or to use their emergency savings.

Note that if you’re among those turning to credit cards to help them get through the pandemic, consider exploring credit card debt consolidation options.

Methodology: Clever Real Estate surveyed 1,500 adults living in the U.S., via an online survey conducted Sept. 9, 2020. All survey participants either paid rent or paid a mortgage on the home in which they live.