LegalShield Law Index Indicates Consumer Financial Stress Creep

  • Consumer Financial Stress Hits Highest Level For 2018, Though Remains Low Overall 
  • Residential Real Estate Market Continues to Struggle, Likely Setting A Rougher Path For Young Home Buyers 
  • Solid Economic Fundamentals Will Carry Forward Into 2019, Despite Recent Drops in Consumer Confidence  

ADA, Okla.--(BUSINESS WIRE)--The 4th Quarter 2018 LegalShield Law Index, a suite of leading indicators of the economic and financial status of U.S. households and small businesses, released today, indicates a modest increase in consumer financial stress and continued struggles for the U.S. housing market heading into the new year.

The LegalShield Consumer Financial Stress Index increased 1.1 points in the fourth quarter to 76.0, its highest reading of 2018 (though still low by historical standards). The increase in consumer financial stress detected by LegalShield data is also apparent in the Conference Board’s Consumer Confidence Index, which fell sharply in December. However, it is important to note that while various measures of consumer sentiment have also slipped in recent weeks, consumer attitudes toward the U.S. economy remain quite strong, reflecting continued job growth, a sub-4% unemployment rate, and the strongest nominal wage growth in a decade.

“The previous Consumer Financial Stress Index pointed to a slight drop in consumer confidence that occurred in late 2018, but also predicted a robust holiday shopping season,” said Dave Coffey, Senior Vice President and Chief Digital Officer, LegalShield. “The 4th Quarter data suggests the stress index level increasing slightly as we enter 2019, but overall economic fundamentals and consumer outlook staying on solid ground.”

The LegalShield Housing Activity Index edged down in the fourth quarter from 111.7 to 111.3. The Index, which is designed to track housing starts, suggests that the combination of higher interest rates and the increasing cost of home building materials (partly due to steel and aluminum tariffs) makes it unlikely that residential construction will improve in early 2019.

Similarly, the LegalShield Real Estate Index, which is designed to track existing home sales and is a component of the Housing Activity Index, declined 2.0 points to 100.0 in Q4 and is down 2% from a year ago. The Real Estate Index has been a reliable indicator of existing home sales throughout 2018, which are now 7% below year-ago levels and have fallen on an annual basis for nine consecutive months.

“With homebuilding sentiment at its lowest since early 2015 and in light of elevated home prices and higher mortgage rates, it is more difficult for younger generations and first-time buyers to make their first home purchase,” said Coffey. “While mortgage rates have come down a bit in recent weeks, our data indicate that both housing starts and sales of existing homes will continue to tread water in the first quarter.”

The LegalShield Bankruptcy Index declined (improved) 3.7 points to 47.0 in Q4 and is essentially unchanged on the year, reflecting the firm financial footing of U.S. consumers. Given robust labor market health and annual wage growth now exceeding 3%, it is unsurprising that bankruptcy filings are muted, and this condition should hold through the first half of the year at a minimum.

Meanwhile, the LegalShield Foreclosure Index declined 1.7 points to 59.1 in Q4 and is now nearly 10% below year-ago levels. Deteriorating affordability and elevated input costs have created headwinds for the housing market, but LegalShield data continue to suggest that foreclosure activity is not a significant threat to the economy over the near term.

“Although the LegalShield Law Index indicates rising consumer financial stress and a stagnant housing market, we would disagree with some of the ‘doom and gloom’ forecasts from some market watchers to describe the economy’s prospects this year,” said Coffey. “While debt levels and rising credit card application rejections should be monitored over the medium term, consumer financial health remains on solid footing, and the economy should continue to expand at a moderate rate through at least the first half of the year. If our Consumer Financial Stress Index continues to rise, however, we could see consumer spending pull back later in the year, which could lead to a significant growth slowdown.”

The quarterly LegalShield Law Index reflects the demand for legal services among the company’s provider law firms in all 50 states. The Law Index is a suite of leading indicators of the economic and financial status of U.S. households and small businesses, and it includes the LegalShield Foreclosure Index in addition to the Consumer Financial Stress Index, Housing Activity Index, Real Estate Index, and the Bankruptcy Index.

About LegalShield

A pioneer in the democratization of affordable access to legal protection, LegalShield is North America’s leading provider of legal safeguards and one of the leading providers of identity theft protection, for individuals, families and small businesses. The 46-year-old company has more than 1.75 million members that are covered by its legal and identity theft plans. IDShield provides identity theft protection to one million individuals. LegalShield and IDShield serve more than 141,000 businesses. Both legal and identity theft plans start for less than $25 per month.

LegalShield’s legal plans provide access to attorneys with an average of 22 years of experience in areas such as family matters, estate planning, financial and business issues, consumer protection, tax, real estate, benefits disputes and auto/driving issues. Unlike other legal plans or do-it-yourself websites, LegalShield has dedicated law firms in 50 states and four provinces in Canada that members can call for help without having to worry about high hourly rates.

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Christine Hardman / Scott Tangney

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