Credit Sesame’s personal finance weekly news roundup July 16, 2022. Stories, news, politics and events impacting the personal finance sector during the last week.
- Definition of “financially comfortable” depends on where you live
- Wealth managers still expect 2022 to be better than 2021
- Consumer debt continues to rise
- Consumers expect inflation to outpace earnings growth
- The rate of inflation continues to accelerate
- Housing price increases are squeezing out some consumers
- Failed home sales may be a sign of a cooling market
- Euro falls to 1:1 exchange value with the U.S. dollar
1. Definition of “financially comfortable” depends on where you live
A Charles Schwab survey found that Americans consider a net worth of $774,000 to be financially comfortable. However, that figure varies a great deal depending on where you live. In the survey’s ranking of 12 major cities, San Francisco had the highest threshold for being considered financially comfortable. Bay Area residents need an average of $1.7 million to consider themselves financially comfortable. New York City had the second highest figure, at $1.4 million. Of the cities on the list, Denver was the easiest place to be financially comfortable. The threshold there was $671,000. All these figures are significantly higher than the average household wealth, which is $121,700 according to the Federal Reserve. See full article at CNBC.com.
2. Wealth managers still expect 2022 to be better than 2021
Despite a host of economic and geopolitical problems, a poll of wealth managers found them marginally more optimistic about business conditions this year than last year. 46% of wealth managers surveyed during the second quarter of 2022 expect this year to be better than last, compared with 43% who were pessimistic. However, there are strikingly different outlooks depending on where you look. In Europe and the Americas, more wealth managers were pessimistic than optimistic. However, their counterparts in Asia and especially those in the Middle East and Africa were overwhelmingly positive. See full article at PrivateBankerInternational.com.
3. Consumer debt continues to rise
The total amount of non-mortgage debt owed by U.S. consumers continued to rise in May. It had already reached record levels. However, at least the rate of increase is slowing. Total consumer debt rose at a 5.9% annual pace in May, following increases of 9.7% in April and 12.7% in March. Credit card debt grew at a faster pace than loan debt. Economists are split on whether continued borrowing reflects a sign of strength for the economy or the effect of high inflation forcing consumers to borrow more. See full article at MarketWatch.com.
4. Consumers expect inflation to outpace earnings growth
The June 2022 Survey of Consumer Finances by the New York Fed found that consumers expect prices to rise more than twice as fast as their earnings over the year ahead. The median one-year expectation among consumers surveyed was that inflation would rise by 6.8% over the next 12 months. Consumers expect their household income is to rise by just 3.2% over the same period. Consumers expect spending to rise by 8.4% over the next year. That would be a healthy increase except that most of it can be chalked up to rising prices. See full release at NewYorkFed.org.
5. The rate of inflation continues to accelerate
The rate of inflation got even higher in June. The latest figures showed that the Consumer Price Index (CPI) rose by 1.3% in the month of June alone. That was even faster than May’s 1.0% increase. The CPI has now increased by 9.1% over the past year. The rapid price increases are an especially hard burden on consumers because the fastest rising prices were in the essential food and energy categories. Fuel oil nearly doubled in price over the past 12 months, while gasoline was up 59.9%. See full release at BLS.gov.
6. Housing price increases are squeezing out some consumers
A report on housing affordability found that rents and home prices in the first quarter of 2022 rose by an average of 12% over the past year. 46% of renters have to spend more than 30% of their income on rental costs. 24% spend half or more of their income on rent. Meanwhile, rising home prices is excluding more of these renters from the opportunity to own their own homes. A 20% increase in housing prices and higher mortgage rates have priced an estimated 4 million renters out of the home buying market. The inability to own a home is widening the gap between rich and poor. Much of the housing price surge has been driven by investors rather than people looking to occupy the homes. See full article in WashingtonPost.com.
7. Failed home sales may be a sign of a cooling market
Nearly 15% of home sale deals fell through in June. That’s the highest failure rate since the initial stages of the pandemic. Real estate professionals attribute the elevated failure rate to a combination of rising interest rates and the return of contract contingencies. Rising interest rates are causing some buyers to back out of deals because they cannot afford the purchase at the higher rate. The fact that more would-be buyers are building contingencies for things like home inspections into purchase contracts suggests that the frenzied stage of the home buying rally may be over. See full article at Marketplace.org.
8. Euro falls to 1:1 exchange value with the U.S. dollar
The value of the euro has fallen to a level of parity with the U.S. dollar. That means that one euro is roughly equal to one dollar. For most of its history, a euro has been more valuable than a dollar. The dollar’s recent strength against the euro and other currencies may be due to global economic weakness and geopolitical turmoil. A strong dollar could bring a bit of welcome relief to the inflation problem, by making imports cheaper. However, the dollar’s strength makes it tougher on U.S. exporters whose products are now more expensive to foreign buyers. See full article at USNews.com.