BEHAVIOR SPENDING : Consumers Cut Back on Major Purchases
Consumers in Orange County, where personal income and luxury spending traditionally have been among the highest in the nation, are holding off on major purchases, reducing their credit card debts and worrying more about money.
Nearly two-thirds of county residents surveyed in the Times Orange County Poll say they often worry about money now, while only 10% say they never do.
About half say they have postponed a major purchase in the past six months, and nearly a third report they are “struggling” to make ends meet.
“I don’t go out and spend money unnecessarily, because if I am laid off, I don’t want to be stuck,” said John Tillery, a 40-year-old McDonnell Douglas employee.
Tillery’s fear of losing his job is shared by 37% of his fellow Orange County residents, up from 24% a year ago. Another 7% report they have already lost a job.
“It’s hard when you’re living paycheck to paycheck,” said Selina Dent, 32, a single mother in Placentia. “I don’t have room for any emergencies. . . . It does worry me.”
Dent saw her paycheck shrink 20% when her company stopped overtime work in September. Her credit cards have been canceled, she now pays her monthly rent in two biweekly installments, and she has put off buying a new television set for four months because her car needed repairs.
“I need my car to get back and forth from work, so things I want have to wait,” she said.
Like Dent, 46% say they have delayed the purchase of a big-ticket household item in the past six months, up from 40% found in a Times Orange County Poll last year, while 47% have put off buying a new car, up from 37% last year. And 34% said they had postponed a house purchase, up from 28% last year.
In a finding that offers little hope to an ailing real estate market, only 11% of the people in Orange County plan to buy a home in the next six months, down from 15% last year. Of those who now rent, 61% have postponed a new home purchase and 14% say they plan to buy in the next six months.
“Despite the drop in (housing) prices and interest rates, people don’t want to buy,” said Cheryl Katz, co-director of the Times Orange County Poll.
People aged 35 to 54 and those earning less than $35,000 per year are the most cautious about their spending plans and they also worry the most about money. Among those earning $50,000 to $75,000 annually, 48% have put off purchasing a big-ticket household item, 40% have delayed buying a car, and 34% have postponed a home purchase.
And even among the most affluent--those earning $75,000 or more a year--22% have postponed buying a house, while 16% intend to buy in the next six months.
Likewise, consumer spending on costly household items such as furniture and appliances does not appear poised for a rebound.
Only 53% think this is good time to buy such items. That is statistically unchanged from the 52% giving this answer in the 1991 Orange County Annual Survey conducted by UC Irvine last September. But it represents a huge drop from 1986, when the annual survey found 83% of residents believed it was a good time for a major purchase.
In every area, the Times Orange County Poll finds consumers more gloomy now than at any time since 1986.
For example, the percentage of people who often worry about money has jumped from 42% in 1986 to 64% today. Those who say their standard of living is “more than comfortable” have plunged from 26% to 13%, and those who say they are “struggling” have more than doubled, from 13% in 1986 to 29% today.
And even people who have jobs say they are slashing their spending.
Mary Pat DeGroodt, a 56-year-old nurse in Huntington Beach, has a secure government job, and though her construction-worker husband has been out of work for four of the past 18 months, she got a raise. Their net income is unchanged from last year--but DeGroodt says they are spending 20% to 40% less and using the rest to pay off their credit cards and their car loan.
“Before, I wouldn’t think anything of buying a refrigerator on time, or a washing machine on time,” she said. “Today, I’d go to a yard sale.”
She also eats at home more, gives her children and grandchildren practical presents and is hitting more swap meets. As she and her husband try to plan for retirement, DeGroodt reports worrying about money “fairly often.”
“I think we’re going to go into a deeper recession, if not a depression,” DeGroodt said. “And people have concerns about that, and so they don’t go into debt.”
In fact, 32% report reducing their credit card debt in the past year, a six-point rise since the Times Orange County Poll last year. The percentage who said their debt level has risen is unchanged at 13%.
However, a third of county residents have dipped into their savings. The survey does not indicate whether people are using savings to pay off their credit cards or drawing on them to cushion hard times. But only 22% say they have more savings than last year, excluding retirement, while 32% have less and 46% have the same amount.
Orange County denizens have a reputation for living well and spending freely.
Median household income here is $48,997, compared with $39,155 for Los Angeles residents and $31,375 for the United States.
Moreover, Orange County residents are 2 1/2 times more likely than other Americans to be earning $100,000 or more, and twice as likely to be investing in real estate, according to statistics from the Standard Rate & Data Service in Wilmette, Ill. Its lifestyle index shows Gold Coast residents also ski, play tennis, travel abroad, drink wine, buy fashionable clothes and health foods, fly, jog and bicycle much more often than do other Americans.
Despite their higher incomes, however, Orange County residents are only 15% more likely to invest in stocks and bonds, according to Standard Rate & Data. That finding was confirmed by the Times Orange County Poll, which found that only 20% are considering investing their money in stocks and mutual funds.
“If Xerox was $7 a share I wouldn’t do that,” said DeGroodt. “I just think our economy is too unstable. That’s for gamblers.”
Although U.S. government economists are betting that lower interest rates will spur a recovery, so far only a quarter of county residents report benefiting from the decline in interest rates, while nearly a third say they have been hurt by the lower yields on savings accounts and certificates of deposit.
Asked whether their mortgage payments had declined as a result of falling interest rates, 25% said yes.
However, 30% say their income has been “significantly affected” by the decline in the interest rates. Especially hard hit have been residents aged 55 and older, of whom 59% say the interest-rate decline, part of the Administration’s bid to revitalize the lagging economy, has significantly cut into their income.
And the drop in interest rates appears to have hurt the poor and the elderly more than it has the wealthy.
Of those earning less than $35,000, 38% say their incomes were hurt by the decline, and only 8% are benefiting from lower mortgage rates.
By contrast, among those earning $75,000 or more, 27% were hurt by the lower interest rates but 37% profited from lower mortgage rates, the survey found.
The Struggle With Household Finances
The Times Orange County Poll asked residents how they arel dealing with the recession. Results are compared to findings from a 1986 Orange County Annual Survey for UC Irvine and a 1991 Times Orange County Poll.
How would you describe your current standard of living?
Comfortable More Not than comfortable comfortable, struggling 1986 61% 26% 13% 1992 58% 13% 29%
Who’s Most Worried About Finances
Percent in each age group and household income bracket that said they were not comfortable or were struggling with their finances: Age 18 to 34: 29% 35 to 54: 34% 55 or older: 20% Household Income Under $35,000: 47% $35,000 to $49,999: 31% $50,000 to $75,000: 29% More than $75,000: 7%
How often do you worry about household finances and money these days?
Very, fairly often Rarely Never 1986 42% 45% 13% 1992 64% 26% 10%
Percent in each age group and household income bracket that said they worry very often or fairly often about household finances: Age 18 to 34: 66% 35 to 54: 70% 55 or older: 51% Household Income Under $35,000: 75% $35,000 to $49,999: 65% $50,000 to $75,000: 71% More than $75,000: 47%
Compared to six months ago, do you have more or less credit card debt, or about the same?
More Less Same 1991 13% 26% 61% 1992 13% 32% 55%
Have you experienced a decline in your mortgage payment? No: 75% Yes, refinanced home loan: 14% Yes, adjustable payment decreased: 11% Source: Times Orange County Poll
