Sep 19, 2013 Philip Burgess
Americans have been experiencing favorable conditions for much of the year, which has led to higher spending levels. As expenditures pickup, the risk of financial troubles can follow suit, potentially leading to an increase in demand for short term lending.
While the Deloitte Consumer Spending Index dipped in August from 4.5 to 4, the firm's senior U.S. economist, Daniel Bachman, said conditions remain strong.
"While the Index fell in August, it continues to indicate that overall conditions are positive for consumer spending," said Bachman. "Americans may remain in a better position to spend, particularly as home prices increase and unemployment rates drop – both of which contribute to improved household finances and sentiment."
"Consumers are seeing positive signals from the economy which may buoy confidence heading into the holiday season this fall," said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader.
Strong home price gains behind increasing household wealth
The main reason consumers have been able to increase spending in recent months is the fact that home prices are increasing at a high rate, which improves household wealth.
Appreciation didn't slow in July, with a 12.4 percent year-over-year gain, according to the CoreLogic Home Price Index (HPI). This was the 17th straight month with annual increases. When compared to June, prices edged up 1.8 percent.
"Home prices continue to climb across the nation in July with markets hit hardest during the downturn leading the way," said Anand Nallathambi, president and CEO of CoreLogic. "Nationally, home prices are now within 18 percent of their peak levels reached in April of 2006."
Gains aren't expected to slow when August's figures are released, as the Pending HPI projects a 12.3 percent annual jump, and a 0.4 percent month-over-month increase.
"Looking ahead to the second half of the year, price growth is expected to slow as seasonal demand wanes and higher mortgage rates have a marginal impact on home purchase demand," said Dr. Mark Fleming, chief economist for CoreLogic.
Residents in Nevada saw the biggest increase at 27 percent, followed closely by California, Arizona, Wyoming and Oregon. Meanwhile, Delaware was the only state to post depreciation, with home prices dropping 1.4 percent.
Short term lending could prove beneficial with higher spending levels
As Americans continue to see improved household wealth, leading to increased spending, short term lending demand may rise. For example, a consumer who decides to upgrade their kitchen with new appliances and cabinets and then sees their car break down might stretch their budget too thin.
Fortunately, financial assistance is available to help ensure people don't fall short on essentials such as rent and food. One option is a short term loan, which can provide consumers with money fast to avoid late fees and penalties on bills.
In recent months, this type of lending has come under fire, but it is important for critics to understand the benefits. While short term loans can come with high fees and interest rates, the cost isn't all that high when the term is only a couple of weeks.
In fact, fees and interest accrued is usually less than what a person would have paid if they missed a payment on a credit card bill, so consumers can save money by taking advantage of short term lending.