Released today, the September 2020 LegalShield Law Index™, a suite of leading indicators of the economic and financial status of U.S. households and small business, saw its two main real estate indices remain at or near record levels during the month, suggesting a sustained rebound in homebuilding and continued strong home sales activity over the next three to six months.
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(Graphic: Business Wire)
The LegalShield Law Index reflects the demand for legal services (intakes) among the company’s provider law firms in all 50 states, and includes five sub-indices focused on consumer financial stress, housing activity, real estate, bankruptcy and foreclosure. The five sub-indices tend to lead an existing economic indicator that sheds light on the health of the U.S. economy.
Benchmarked against monthly reported data from the U.S. Census on housing starts, the LegalShield Housing Activity Index eased 3.5 points in September from an all-time high in August to 134.7, driven by increased foreclosure intakes. Despite the slight decline, however, the preponderance of LegalShield and market data points to a robust homebuilding sector. The LegalShield Housing Activity Index tends to lead U.S. Census data on housing starts (a key economic indicator) by 1-2 months.
Benchmarked against monthly reported data from the National Association of Realtors® on existing home sales, the LegalShield Real Estate Index ticked up 0.7 point in September to 112.5, the strongest reading since late 2005. While the current buying frenzy — driven by sub-3% mortgage rates and, among some buyers, a desire for larger homes in the suburbs and exurbs — is causing prices to rise rapidly, the growth trend appears to be sustainable. The LegalShield Real Estate Index historically tends to lead existing home sales as published by the National Association of Realtors®.
“Our predictive data continues to point to a strong and growing housing market for the remainder of this year,” said LegalShield CEO Jeff Bell. “Despite election uncertainty and an economic aid package caught up in D.C. politics, we see nothing on the immediate horizon that will slow down the real estate boom of 2020.”
Additional highlights from September are as follows:
- The LegalShield Consumer Financial Stress Index increased (worsened) 3.0 points in September from 62.0 to 65.0, though this is still the second-lowest reading ever. While the Consumer Financial Stress Index remains low, there are growing signs that the financial situation for many consumers could worsen absent further stimulus.
- The LegalShield Bankruptcy Index, a forward-looking indicator of bankruptcy filings, was mostly unchanged this month and remains well-below levels seen prior to the pandemic, suggesting that a spike in bankruptcy activity is unlikely in 2020. The index inched up (worsened) 0.6 point to 28.8 in September, though it remains historically low.
- The LegalShield Foreclosure Index rose in September but is still pointing to muted foreclosure activity — at least until relief programs expire. The index rose 5.1 points from an all-time low to 36.7 in September. Second quarter foreclosure starts fell 16 basis points to an all-time low of 0.03%. The near-absence of foreclosures in the second quarter was largely due to a Federal Housing Administration moratorium on foreclosures of federally-backed single-family mortgages, as well as widespread availability of payment deferral programs.
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