Concerned about job safety and lack of savings, homeowners hunker down and pay off debt

05.20.09
By Gerri Detweiler

Homeowners are paying down debt and reducing expenses, according to the latest results of a quarterly survey by Wells Fargo & Company. In the new survey, 37 percent of homeowners report they have paid down debt, while 12 percent say they have paid off debt completely over the past year. At the same time, however, overall debt levels appear to be growing, not shrinking. Half of all homeowners report they have an average of $10,000 or more in debt, a number that is significantly higher than previous quarters. The survey found that 80 percent of homeowners carry debt besides their mortgages.

Debt is only one of the financial concerns weighing heavily on homeowners’ minds. Many of those surveyed expressed worry over a lack of adequate savings and job insecurity. Nearly one in four homeowners (24 percent), for example, do not have any savings to cover their living expenses if they lose their incomes. And rising worries over job stability increased significantly, with 29 percent indicating jobs as their top concern, up from 21 percent in the fourth quarter of 2008.  

The survey also found a growing number of homeowners are making a serious effort to reduce expenses. Just over one-third of homeowners (34 percent) have had family or friends move in with them, and 42 percent report spending less on their children. Budgeting is also coming back in fashion, but it’s still largely a do-it-yourself effort: 30 percent of those surveyed said they are learning to manage their budgets on their own, without professional assistance.

Wells Fargo, which provides free budgeting and debt reduction tools through its Smarter Credit center, reports that while there was a rise in respondents’ desires to better manage debt and credit (40 percent versus 33 percent), a mere 4 percent of those surveyed sought professional help in the last year to better run their household budgets.

“The silver lining is that people are taking more charge of their situations,” notes Jamie Modolfsky, an executive vice president in the Wells Fargo Home Equity Group. Consumers seem to be moving from a state of panic to one of action, she observes. Modolfsky also says that Wells Fargo is seeing higher savings rates among its customers, which she believes is a good sign in the long run. “As people start to feel better about their situations,” she predicts, “the economy will start to return."

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Consumers seem to be moving from a state of panic to one of action.