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News roundup March 2, 2024

Personal finance news March 2

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Credit Sesame’s personal finance news roundup March 2, 2024. Stories, news, politics and events impacting personal finance during the past week.

  1. 2023’s home price rally faded late in the year
  2. Household wealth has gone through wide swings but little net change in recent years
  3. Consumer confidence soured in February 2024
  4. Consumer credit conditions seem to be heading in two different directions
  5. Estimate of GDP growth in Q4 still strong despite downward revision
  6. Key inflation measure confirms upturn in pace of price hikes
  7. Mortgage rates continue to climb

2023’s home price rally faded late in the year

S&P Global reported that US home prices rose by 5.5% last year. However, prices declined in both November and December. While this may be partially due to seasonal effects, last year’s mortgage rate rise is also likely to have had an impact. 17 out of 20 major metro markets saw home price declines in December. See analysis at SPGlobal.com.

Household wealth has gone through wide swings but little net change in recent years

A new study by the Federal Reserve Board of San Francisco found that household wealth is on roughly the same path it was on before the pandemic. However, between the start of the pandemic and now, household wealth has seen a dramatic rise and fall. Household wealth grew rapidly in the years 2020 and 2021. Over those two years, inflation-adjusted household wealth grew by 20%, mainly because of reduced personal spending due to pandemic restrictions and generous government assistance. This reversed sharply in 2022 and 2023, due largely to inflation and bear markets for financial assets. This rise and fall has left household wealth close to where it would have been at the pre-pandemic pace. See summary at FRBSF.org.

Consumer confidence soured in February 2024

The Conference Board reported that its Consumer Confidence Index fell in February. This was the first drop in the index since October. In addition, January’s original estimate was revised downward. Consumers reported less confidence about current economic conditions and the near-term outlook for the economy’s future. February’s decline put the component of the Consumer Confidence Index that measures the near-term outlook below a level traditionally associated with recessions. See news release at Conference-Board.org.

Consumer credit conditions seem to be heading in two different directions

The latest VantageScore CreditGauge report showed that newly delinquent consumer credit accounts rose to their highest level in nearly four years. Delinquency rates rose across all credit tiers and all products covered by the report (auto loans, credit cards, mortgages, and personal loans). However, the experience was not universal. While 0.3% of prime credit customers dropped into the subprime tier in January, another 0.7% rose from the prime tier to the superprime tier. While people with lower credit scores fell further behind on their payments over the past year, people with higher scores generally continued to keep up with theirs. See article PRNewswire.com.

Estimate of GDP growth in Q4 still strong despite downward revision

The Bureau of Economic Analysis’ second estimate of Gross Domestic Product (GDP) for the final quarter of 2023 showed that the economy grew at an annual pace of 3.2% after adjustment for inflation. This was slightly below the original estimate of 3.3% but still shows the economy was solidly expanding as the year ended. For the full year, GDP grew by an inflation-adjusted 2.5%, beating the 1.9% growth of the previous year. See details at BEA.gov.

Key inflation measure confirms upturn in pace of price hikes

The Personal Consumption Expenditures (PCE) price index rose 0.3% in January. That was the biggest increase since September 2023 and matched the rise in the Consumer Price Index (CPI) for January 2024. Core PCE inflation (which excludes food and energy) rose by 0.4%, which also matched the CPI core reading for January. A 0.3% increase would amount to an annual inflation rate of nearly 3.7% if continued over an entire year. This would be well above the Federal Reserve’s target of 2.0% and represents an upturn from the 2.4% increase in the PCE price index over the past 12 months. The PCE price index is especially significant because it is the measure of inflation the Federal Reserve primarily considers in making interest rate decisions. See details at BEA.gov.

Mortgage rates continue to climb

30-year mortgage rates rose for the fourth week in a row. Last week’s increase was by four basis points, bringing 30-year rates to 6.94%. That’s the closest they’ve been to the 7% mark since mid-December. In contrast to 30-year rates, 15-year rates fell last week. 15-year rates fell by three basis points to 6.26%. See rate information at FreddieMac.com.

Weekly news headlines from Credit Sesame

Richard Barrington
Financial analyst for Credit Sesame, Richard Barrington earned his Chartered Financial Analyst designation and worked for over thirty years in the financial industry. He graduated from St. John Fisher College and joined Manning & Napier Advisors. He worked his way up to become head of marketing and client service, an owner of the firm and a member of its governing executive committee. He left the investment business in 2006 to become a financial analyst and commentator with a focus on the impact of the economy on personal finances. In that role he has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications.

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