Highlight Reel: What’s the Buzz?
Let’s start with a popcorn-style rundown of the news this week. Here’s what we’re chatting about:
* The home prices rally of 2023 lost steam towards the year-end
* Household wealth took a roller-coaster ride recently, but the net change was minimal
* February 2024 saw consumer confidence taking a dip
* Consumer credit conditions point towards a fork in the road
* The estimate of GDP growth for Q4 remains robust despite a downward revision
* The key measure of inflation confirms an acceleration in price increase
* Mortgage rates are on an upward trajectory
Now, let’s nose dive into each of these nibbles of news.
Doused Flames: Home Prices Rally Fizzles Out
In 2023, the real estate sector had a gleeful grin on its face as home values in the US climbed 5.5%. But the joyride hit a bump towards the year-end, with home prices dipping in November and December. Likely culprits? Unfavorable seasonal trends and a hike in mortgage rates. Of the top 20 city markets, a surprising 17 witnessed a decline in home prices in December. Hold your horses, aspiring homeowners, your dream house may just be on the horizon!
Swinging Sideways: Household Wealth Movement
A fascinating study by the good folks at the Federal Reserve Board of San Francisco has shaken the snow globe. They found that the trajectory of household wealth has been somewhat samey since the pandemic. However, the journey to this steady state has been anything but boring! Household wealth soared high in 2020 and 2021, thanks to lower personal spending and a good burst of government support during the pandemic. But the joyride came to a screeching halt in 2022 and 2023, as inflation fears and bear markets took the wheel. Despite the thrilling ride, we’ve essentially been going in circles — we’re back where we were pre-pandemic!
Slim Confidence: Consumer Confidence in Feb 2024
February 2024 wasn’t the favorite month for consumer confidence, recording its first tailspin since October. This data from The Conference Board also saw a downward revision for January’s confidence levels. The confidence endured a double whammy, with consumers lamenting current economic conditions and expressing apprehension about the future. Looking at the Consumer Confidence Index, we’ve entered territory often reserved for recessions. Doom and gloom, or just a minor slump? Time will tell.
Fork in the Road: Consumer Credit Conditions
The Credit Gauge Report from VantageScore unveiled a curious trend where consumer credit conditions seem to be headed to what seems like two different destinations. There was a worrisome climb of newly delinquent consumer credit accounts to a peak not seen in almost four years. All credit tiers and products (auto loans, credit cards, mortgages, and personal loans) weren’t spared. However, not all is lost! While a small 0.3% of prime credit customers slipped into subprime territory, an encouraging 0.7% ascended to the superprime layer. Clearly, fortune favors some while others fall behind. Financial discipline is the name of the high-score game.
Resilient Growth: GDP Estimate for Q4
Despite jiving to a slightly slowed tempo, the GDP growth rhythm for Q4 2023 was pretty vivacious. The Bureau of Economic Analysis’ second estimate revealed an inflation-adjusted growth rate of 3.2%. Although the spotlight dimmed from an initial estimate of 3.3%, the economy was expanding energetically as the curtains fell on 2023. Across the entire year, the GDP bounced up by 2.5%, outshining the previous year’s growth of 1.9%.
Pricey Times Ahead: Inflation Measures Rise
January saw the Personal Consumption Expenditures (PCE) price index on the rise by 0.3%, a jump not seen since September 2023. Excluding food and energy items, core PCE inflation hopped upwards by 0.4%. Such an increase, if continued unabated for an entire year, would mean an annual inflation rate close to 3.7% – a giant leap from the Federal Reserve’s modest target of 2.0%. Promising pricey times ahead, we’re on an inflation roller coaster, so hold on tight everybody!
Soaring Skies: Mortgage Rates Rise
Mortgage rates took the staircase to the stars for the fourth week in a row, with 30-year rates settling at 6.94%, flirting dangerously with the 7% mark. However, 15-year rates decided to chill and declined slightly, lounging at a cool 6.26%.
My Two Cents
Navigating personal finance can feel like dancing on a tightrope, as unpredictable as a roller-coaster ride yet exhilarating once mastered. The ups and downs of mortgage rates, consumer confidence, or credit conditions remind us of the inherent risks and rewards in our financial lives. It’s crucial to stay informed and financially literate, ready to make adjustments on our path to financial stability. Remember, even during a roller coaster ride, the key to balance is to keep looking ahead – so chin up, buttercup!
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Original Article:https://www.creditsesame.com/blog/headlines/roundup-march-2-2024/
