Economic Recovery Fueled by Stimulus Checks and Savings 

Many U.S. households have had a chance to create healthy savings for 2021, which is expected to help fuel the economic recovery from the Coronavirus. To date, there have been two federal Covid-19 aid packages including a $1,200 check last spring, and $600 in December. Sent to households in need of relief, up next, the House will be voting on a new $1.9 trillion relief package, which could be as soon as later this week. The latest federal relief package would mean another $1,400 check coming soon.

Of the first round of stimulus checks, more than a third were saved, according to an analysis by the Federal Reserve Bank of New York. Specifically, consumers saved 36%, spent 29%, and used 35% to pay down debt. Consumers were also expected to spend an even smaller share of future stimulus payments, instead of focusing on paying down more debts. Which would explain why we’ve been seeing credit scores rise.

According to Berenberg Economics, Americans saved $1.4 trillion from January – September 2020, which equates to nearly 10% of household spending in 2019, estimates Berenberg’s chief economist, Holger Schmieding. Affluent households have also been able to save more over the past year, curbing spending during the pandemic and seeing real estate values skyrocket.

2021 Outlook

As business restrictions continue to be lifted and the vaccine is more widely available, pent-up demand is expected to propel growth for the economy as people can once again be out spending more. According to the state website, California should have most residents vaccinated by summer 2021, meaning recovery could be well underway in just a few months. Although nonessential businesses like salons, bars, movie theaters, and more have been closed during the pandemic, once demand picks up and people can safely begin spending money, economists expect employers will rehire quickly.

Also expected this year is a very strong spring and summer market for real estate. With bidding wars continuing to pick up steam, we’re looking forward to the housing market returning to its usual season pattern. The busy spring season should bring slightly more inventory, but we’re still in the midst of a housing shortage so the Southern California market will remain tight, continuing to push up home values. To learn more about the housing market expectations for SoCal, check out our full list of predictions for 2021.

An Uptick In Rates

Homebuyers have been enjoying historically low mortgage rates over the past year, but as we see the economy continue to recover, rates will begin to rise as we’ve seen with the latest Mortgage Watch. And a rise in rates may not be such a bad thing. Increasing mortgage rates is a sign of a strong economy, which helps increase home buyer demand. The housing market can continue to thrive amid rising rates.

While lower-income households are more likely to spend their checks straight away, there is a significant portion of Americans who are now in a more financially advantageous position.

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