15
Oct

While the economy has generally been improving for some time now, and many experts have noted the effect these steps forward have had on consumers, new data shows exactly how much they've helped.

A number of economic studies and other indicators show that consumers are generally now in some of the best financial shape they've been in during the last several years, according to a report from Bloomberg News. For instance, Federal Reserve Board statistics show that the amount of debt held as a share of the average American's disposable income fell to 113 percent in the second quarter of the year. That's down from the all-time high of 134 percent reached in 2007, prior to the beginning of the recession.

This change came largely because debt payments are now at the lowest point in 18 years, while delinquency rates on credit cards from all lenders stands at the lowest level since the end of 2008, when the recession was in full swing, the report said. It is believed, in turn, that these improvements will lead the nation's Gross Domestic Product to grow in 2013 at about the same rate observed this year.

What does this mean?
As the nation's economy continues to improve and consumers find themselves in better positions, major financial institutions may loosen their requirements for potential borrowers, the report said. 

Further, because home prices are rising as well, so too is household net worth, the report said. For instance, in the second quarter, the Standard & Poor's/Case-Shiller index showed that the average home price is at its highest point in the last six years. In turn, the Fed found that net worth as a percentage of income rose to 527 percent during the same period, up from the low of 477 percent seen in the first quarter of 2009, at the height of the recession.

That statistic is perhaps most interesting because of what it represents on a historical basis, the report said. While the current 527 percent is far lower than the all-time high of 652 percent set in 2006, it is also higher than the average 515 percent seen since 1980.

Improving finances means more spending
Consumers were generally cautious about spending their money during and immediately following the recession for obvious reasons, but now that many are finding themselves on firmer financial footing, they are more willing to put down large amounts on things they consider important, the report said. And while many Americans are choosing to cut their debt with their extra money, others are choosing to buy items they may have been required to put off in the past.

"We are seeing some big-ticket spending," James Paulsen, chief investment strategist in Minneapolis for Wells Fargo Capital Management, told the news agency. "They are things you don't see unless you are pretty confident of your balance sheet."

This was reflected in a slight expansion of the U.S. economy last month, the report said. Much of this spending has come through housing transactions as well as purchases of new cars and light trucks. Further, improvements in the real estate market in particular have been steady, rising to a seasonally adjusted projected rate of 14.9 million for the year. That's the most since March 2008, and up from the 14.5 million estimated in August.

Not only did foreclosure filings slip 16 percent in September, but statistics also show that interest in new housing is on the rise, the report said. In all, new home starts are projected to expand to 900,000 next year from the estimated 750,000 that will be completed by the end of 2012.

Back to risky borrowers
Part of that auto sales surge came as a direct result of lending to consumers with lower credit scores, the report said. For instance, auto loans extended to borrowers considered "risky" jumped 14 percent in the second quarter on an annual basis, though lenders still generally remained somewhat cautious. It's unclear when, if ever, lenders will return to the standards they allowed in 2005 and 2006, prior to the recession's onset.

If you're feeling better about your personal finances and thinking about borrowing once again, it might be a good idea to first look into how healthy your credit standing is. One way in which you may be able to do this is ordering a copy of your credit report and checking it closely for any unfair markings that may be lowering your credit score.


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