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Fewer foreclosures could push consumers to spend more

Jan 07, 2014 Philip Burgess

Following the financial crisis, millions of American homes were foreclosed on, which led people to pull back on spending while they got back on their feet. Now that the housing market is in full recovery mode and foreclosures are becoming less frequent, consumers may be inclined to spend more in the future.

In October, 48,000 foreclosures were completed - down 25.6 percent from September and 30 percent year-over-year, according to CoreLogic's National Foreclosure Report. The amount of distressed properties on the market continued to decline as well, falling to 879,000 homes, compared to 1.3 million a year earlier.

"Year over year, the foreclosure inventory, as a percentage of all homes with a mortgage, has declined almost a full percentage point to 2.2 percent," said Mark Fleming, chief economist for CoreLogic. "This is good news for the housing and mortgage finance markets, but the rate remains elevated relative to the pre-crisis level of about 0.6 percent. There are almost 900,000 properties still in foreclosure, but a normal level would be only a quarter of the current stock."

Increased spending could boost short term lending demand
With the potential for decreasing foreclosures to leading to higher spending levels, short term lenders may want to prepare for more customers in the future.

When people increase expenditures, they are also putting themselves at financial risk. For example, if a unexpected expense, such as a car breaking down, occurs following a major purchase, consumers may struggle to cover the repair bill and all their monthly essentials. If a payment is missed, people could be at risk of costly late fees and penalties, but that doesn't have to be the case.

Anyone who finds themselves in such a situation might want to consider a short term loan. This type of financing can provide money fast so consumers don't fall short on any expenses. However, short term lending is often avoided due to the attached stigma. Critics say high fees and interest rates are charged, which makes these loans unfair. However, the cost to obtain a short term loan is often less than what consumers would incur in late fees and penalties by missing a bill payment. So, people really need to look at the whole picture before ruling out short term lending.