Consumer Trends and the Year Ahead
Dave Hansen, EVP / Head of Retail Banking
In 2024, household finances have continued to be impacted by a number of economic challenges, including higher prices and interest rates. As we close out the year and look ahead to 2025, Dave Hansen, Executive Vice President and Head of Retail Banking, shares insight on some of the trends that will shape the coming year and steps individuals and families can take to prepare financially, including how a bank can support their financial goals.
Q. Big picture, how are consumers faring generally, and what should they focus on as they plan for the new year?
As we head into 2025, consumers are showing strong resilience. While higher prices have squeezed their wallets in recent years, declining inflation has helped bolster consumer confidence. The U.S. Department of Commerce recently reported consumers increased their spending slightly in the month of October as prices moderated. This trend is expected to continue through the end of the year. Holiday spending, for instance, is expected to jump more than $30 billion over last year. That’s a good sign.
In terms of financial planning, we always recommend that individuals take the time for a year-end “financial checkup” with a banker or financial advisor and tax consultant to set a strong foundation for the year ahead.
Q. With consumer debt rising, what steps should consumers take to manage debt before it becomes an issue, especially with holiday expenditures around the corner?
While U.S. household debt has spiked recently, many consumers are in a stronger position to pay their debt off. For those carrying debt, particularly from high-interest credit cards, we strongly recommend paying down the balances with the highest rates first.
While the Federal Reserve has cut interest rates twice this year, significant declines in short-term rates will likely be slower to materialize, and it will take time for those cuts to be reflected in credit card rates. In the meantime, paying down expensive credit card debt should be a priority. Also, creating a budget and meticulously tracking expenses will help households better understand their financial situation and identify ways to potentially cut back and improve debt management.
In terms of the holiday season, there are parties and celebrations, and it’s easy to get caught up in the excitement and overspend. Discipline is key. We recommend setting a budget and sticking to a shopping list. Take advantage of Black Friday and Cyber Monday deals, credit card promotions and rewards, and compare prices. Simply staying on top of credit card usage and having a plan to pay off purchases quickly can help avoid adding burdensome long-term debt.
Q. There is a lot of speculation about how low interest rates will go and the impact that might have on homebuying. As interest rates come down, do you expect this to spark renewed activity?
Prospective homebuyers may want to temper their expectations. While the Fed has cut rates twice this year, I don’t think we will see much near-term change in mortgage rates, which currently are in the 6% to 7% range. As a result, homeowners with mortgages at historically low rates, such as 3% or 3.5%, are likely to postpone selling their current property to buy another so they can keep those lower rates.
This dynamic has shifted the focus toward remodeling rather than moving. Homeowners are investing in improvements to their current properties and looking to secure the capital they need to make those improvements. In other words, it’s a good time for homeowners to add value to their properties, and the remodel market will continue to be strong.
Of course, housing trends vary by region. For example, I was in Salt Lake City a couple of weeks ago, and new home construction there is robust due to inbound migration ― a trend not seen in every market. Broadly speaking, I expect the housing market will remain soft.
Q. Consumers are becoming more vulnerable to fraud. With the holiday season here, can you share some practical steps they might adopt to protect themselves from fraud and cyberthreats?
Fraud is on the rise, especially during the holiday season, and will continue to be a major challenge. Staying vigilant is more important than ever. There are two steps I take daily to help protect against fraud. First, I check my online banking balances and transactions every day. If someone gains access to my account, unusual entries might be the first red flag. Second, if I notice a transaction I didn’t authorize, I immediately contact my bank. Reporting unauthorized activity quickly minimizes further risks and increases the likelihood for loss recovery.
For holiday shopping, I recommend a few additional steps to stay safe:
- Shop only with reputable retailers.
- Use one credit card with robust fraud protection for all holiday purchases.
- Stick to secure websites (look for “https” in the URL) and use strong passwords.
- Be skeptical of deals that seem too good to be true ― they often are.
These tips can help you reduce risk and avoid common pitfalls.
One additional tip that consumers should heed year around: if you receive a phone call or a text from someone claiming to be from your bank and are asked to either confirm or provide any form of personally identifiable information, hang up (or delete the text) and call your bank directly to determine whether the inquiry is legitimate. Fraudsters are becoming increasingly convincing in their attempts to gain access to your accounts.
Q. What should consumers look for in a bank to support their financial goals in 2025 and beyond?
Personalized, accessible, relationship-focused support. Technology offers amazing convenience, but there’s still a need for human-based counsel in the customer experience.
At Umpqua, we like to think of our bankers as “quarterbacks” for each client and business owner, coordinating with experts from various areas of our organization. Individuals and business owners alike can sit down with our bankers to review their goals, whether they are five or 10 years out. We look at their complete financial picture and work closely with them to set up plans to help them accomplish those goals. We also tap our trust division for advisors who are trust, estate, and insurance experts to provide specialized financial counsel.
Regardless of the size of their account, we encourage customers looking to strengthen their household finances to schedule a consultation. With 2025 upon us, now is the time to do it.
