Retail sales took a hit in May 2025

U.S. retail sales suffered a bigger drop than was expected in May. Retail sales fell by 0.9% during the month, more than the expected decline of 0.6%. Year-over-year, retail sales were up by 3.3%, a substantial slowdown from the 5% gain through April. In part, the sharp drop in retail activity in May was a recoil from unusually strong activity the prior month. In April, consumers had rushed to buy big-ticket items such as vehicles to get ahead of new tariffs. Notably, auto sales declined by 3.5% in May. See article at MSN.com.

Fed dampens expectations for rate cuts again

The Fed entered 2025 expecting to make multiple rate cuts during the year. However, after its recently completed meeting, the Fed announced that it still isn’t ready to make its first rate cut of 2025. The Fed’s rate target remains 4.25% to 4.5%. Besides holding off on cutting rates, the Fed has also reduced its projections for future rate cuts. While the Fed still expects to cut rates by half a percent this year, its rate targets for 2026 and 2027 are not as low as previously. Last September, the Fed issued projections showing that it expected the Fed funds rate to drop to 3.4% in 2025, 2.9% the following year and remain at 2.9% in 2027. Those targets have since been elevated to 3.9% for this year, 3.6% for next year and 3.4% for 2027. See Federal Open Market Committee Statement at FederalReserve.gov.

Tariff fears eroded household wealth in Q1 2025

U.S. households and nonprofit organizations lost a combined $1.6 trillion in the first quarter of 2025. The loss of wealth was caused by the stock market’s decline due to concern over the impact of tariffs. Meanwhile, household debt rose by 1.9% during the quarter. See article at Reuters.com.

U.S. workforce faces labor shortage

The U.S. needs to add an average of at least 4.6 million workers a year between now and 2033 to maintain a workforce sufficient to meet the country’s needs. This is according to a new report by the Committee for Economic Development (CED), which is the public policy center of the Conference Board. The CED warns that policy changes to expand the labor force are needed to avoid a shortage of workers in the years to come. Policy changes it recommends include reforms to the Social Security earnings test, gearing immigration rules towards admitting qualified workers, encouraging flexible work arrangements and making childcare more readily available. See news release at Conference-Board.org.

First-time buyers now spend nearly 60% of income on mortgages

A new study from the JPMorgan Chase Institute shows that mortgage payments are now taking up 45 percent more of household budgets than they did in 2019. Home prices have increased by 50 percent over the same period, and mortgage rates have also risen. Both factors are pushing up monthly costs. For people aged 25 to 44, who make up most first-time homebuyers, a typical mortgage payment used to take up 40 percent of their disposable income. By 2024, that had increased to 57.5 percent. See article at Realtor.com.

Government agencies team up to fight fraud

Various federal banking agencies issued a joint announcement of intentions to coordinate efforts to fight fraud. The statement was issued by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Reserve. Besides the cooperation on the federal level, the statement signaled an intent to work with state regulatory agencies. A particular area of emphasis is check fraud, which has soared in recent years. See article at PaymentsDive.com.

Budget cuts affect collection of economic data

Citing a lack of resources, the U.S. Bureau of Labor Statistics (BLS) announced that it was cutting back on the data collection efforts that go into calculating the Consumer Price Index (CPI). The CPI is the most widely followed measure of U.S. price inflation. The data affects financial markets, cost-of-living adjustments and economic policy decisions. The BLS explained that it is reducing sample collection efforts, including suspending data collection in some cities. See announcement at BLS.gov.

Sales of new homes slowed sharply in May

Applications for mortgages to buy newly-built homes dropped 9% in May compared with the previous month. Completed sales of new, single-family homes suffered an even steeper drop, falling by a seasonally-adjusted 12.1% in May. The drop-off in May reverses a large jump in new home sales in April, and is more in line with the level of activity seen earlier in the year. Mortgage rates rose sharply in mid-April. This, along with a significant level of economic uncertainty and a growing inventory of existing homes for sale, is thought to have contributed to the sharp decline in new home sales in May. See commentary at MBA.org.

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Corporate profits surge since COVID

A study by the Federal Reserve Bank of St. Louis shows that U.S. companies have made significant gains in the years since the pandemic began. This represents more than just a rebound from the initial economic slump. In dollar terms, corporate profits have more than doubled since 2010, with most of the growth occurring after 2019. Profits have outpaced overall economic growth, rising from an average of 13.9% of national income from 2010 to early 2020, to 16.2% since 2020. See summary at StLouisFed.org.

Debt collectors set to resume student loan pursuits in May 2025

The Department of Education announced it will begin referring delinquent student loan borrowers to debt collectors starting May 5. The department had already resumed reporting delinquent payments to credit bureaus, but referring the account to a collector is another major negative for credit scores. About 5 million of 42 million borrowers are currently in default. Borrowers may face consequences, such as wage garnishment, unless they resume payments or arrange a repayment plan with their servicer. See article at NYTimes.com.

Sharp drop in existing home sales in March 2025

Sales of existing homes fell by 5.9% in March, with homes selling at a seasonally adjusted annual rate of 4.02 million. The sales volume is 2.4% lower than it was a year ago. Despite the slowdown, home prices have risen year-over-year for 21 straight months, reaching an average of $403,700. Rising inventory could pressure prices, with unsold home supply increasing by 8.1% last month. The West had the steepest decline in sales, down 9.4%, while the Northeast saw a milder 2.0% drop. See home sales data at NAR.Realtor.

Mortgage rates dip slightly after sharp rise

After jumping 21 basis points the previous week, 30-year mortgage rates edged down by two basis points to 6.81%. Meanwhile, 15-year mortgage rates fell nine basis points to 5.94%, slipping back under 6%. Current 30-year rates are 4 basis points lower than at the start of 2025 but remain 73 basis points higher than their low point in September 2024. See rate data at FreddieMac.com.

Study shows shifting middle-class income ranges

A new Bank of America study reveals that the income thresholds for the middle class vary widely by household type. Overall, a household needs about $80,000 to reach the median. However, single-income households typically earn $60,000, while multiple-income households average $136,000 per year. Nearly 40% of middle-income households are headed by people aged 25 to 44. See article at Yahoo.com.

Loan delinquencies ease but remain elevated

TransUnion’s latest Credit Industry Snapshot shows that delinquency rates for auto loans, credit cards, mortgages, and personal loans declined slightly in March 2025. Even subprime loans showed improvement. However, delinquency rates are still up compared to a year ago, with auto loan delinquencies rising 4.6% and mortgage delinquencies up 19.2%. Mortgages and auto loans, backed by collateral, remain among the safer loan types despite recent trends. See details at TransUnion.com.

Home-buying confidence plunges

Survey data from the Federal Reserve Bank of St. Louis shows that confidence in buying a home has fallen sharply since last November. The Home Purchase Sentiment Index, which tracks views on home prices, mortgage rates, and personal finances, dropped 9.2% since November, including a 4.9% decline in March alone. The index now sits 11.3% below its historical average. See index data at StLouisFed.org.

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Economic growth continued in Q4 2024

The US economy finished 2024 with its 11th consecutive calendar quarter of economic growth. In the fourth quarter, Gross Domestic Product (GDP) grew at an inflation-adjusted annual rate of 2.3%. That’s lower than the third quarter’s growth rate of 3.1%. GDP grew by 2.8% for the year, similar to 2023’s 2.9% growth. See details at BEA.gov.

2024 existing home sales lowest in nearly 30 years

Sales of existing homes totaled 4.06 million last year. This was the lowest annual total in nearly 30 years, according to the National Association of Realtors. The median price of existing homes sold reached $407,500, an all-time high. High prices and elevated mortgage rates slowed the total volume of homes sold. Home sales did improve in December 2024. Existing homes sold at a seasonally-adjusted annual pace of 4.24 million during the same month. That was a 9.3% increase from the previous December, the strongest year-over-year rise since October 2022. See details at NAR.Realtor.

Hiring freeze may slow placement of bank examiners

The Washington Post reported that the federal government’s new hiring freeze would cause the FDIC to rescind 200 job offers to candidates to fill vacancies for bank examiners. These positions inspect the operations and financials of banks to ensure they are within policy guidelines. These efforts are intended to protect the stability of the banking system. See details at WashingtonPost.com.

CFPB finds cash-out mortgage refinance boosting credit scores

The Consumer Financial Protection Bureau released a report showing that people who obtained a cash-out refinance mortgage generally improved their credit scores. This is linked to paying off bills or other debts, the most commonly cited reason for cash-out refinancing. People typically showed dramatic drops in credit card and auto loan balances when they got these mortgages. The average results included a steep, immediate increase in credit scores. Though scores drifted back down later, they were still typically higher than before refinancing. Cash-out refinancing can be used to retire more expensive forms of debt. The CFPB also warns that it can increase the risk of foreclosure. See details at ConsumerFinance.gov.

Fed leaves interest rates unchanged for now

The Federal Reserve announced it will leave the Fed funds rate within a target range of 4.25% to 4.50%. This is the first time since last July that the Fed has met without cutting interest rates. Over its most recent three meetings, the Fed has cut rates by 1%. However, the decision to leave rates unchanged is not a surprise. The Fed is aiming to balance encouraging growth and limiting inflation. With the economy continuing to grow and recent signs that inflation is perking up, the Fed had no compelling reason to hurry the next rate cut. The Fed’s latest economic projections show they expect to cut rates by 0.5% this year, and with seven more meetings on the calendar for 2025, the Fed should be expected to leave rates unchanged more often than not. See details at FederalReserve.gov.

US bank finances improved in Q4 2024

Credit analyst firm Fitch Ratings reported that the financial performance of large banks improved in the final quarter of 2024. Banks benefited from a rise in net interest income. This is the difference between the interest banks earn from loans and the interest they pay on deposits. Banks can quickly lower the rate they pay on deposit accounts when short-term interest rates fall, as they did in late 2024. However, they can lower rates on credit cards more slowly. Also, many long-term loans they make to customers have fixed interest rates, so these don’t change immediately when rates fall. Stronger net interest income is good for the banking system’s stability, though it can represent a bad deal for individual bank customers. See commentary at FitchRatings.com.

AI helps spot fraudulent account applications

Banking security firm Socure recently used artificial intelligence to spot thousands of fraudulent checking and credit card account applications. The applications used real names and personal information of Massachusetts residents to set up the bogus accounts. The AI program flagged the applications based on the unusually high volume and the time of day they were made, which correlated with a foreign time zone rather than typical US business hours. Closer examination found that although the addresses given on the applications were of Massachusetts residents, the IP addresses the applications came from were outside the state. See story at Boston25news.com.

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Pending home sales rise again in October 2024

The National Association of Realtors’ Pending Home Sales Index (PHSI) rose by 2% in October. That was the third consecutive month that the PHSI increased. The PHSI is considered a forward-looking indicator of home sales because it is based on when purchase contracts are signed as opposed to when sales are closed. All four regions of the United States have shown growth in pending home sales over the most recent month and year. The Northeast region had the fastest growth in October, with a 4.7% increase in pending home sales. The West led the way over the past 12 months, with a 16.8% increase in pending home sales since October 2023. See report at NAR.Realtor.

Personal income shows large increase in October 2024

Personal income grew by 0.6% in October. That was twice September’s growth rate and the highest monthly growth since March. The Personal Consumption Expenditures (PCE) price index showed 0.2% inflation during October, consistent with September’s inflation rate. The PCE price index is up by 2.3% over the past year, just slightly above the Federal Reserve’s target of 2.0%. However, core inflation, which excludes the volatile food and energy sectors, grew by 0.3% in October and by 2.8% over the past twelve months. The PCE price index is significant because it’s the index the Fed uses to measure progress toward its inflation goals. See personal income report at BEA.gov.

Home prices eased slightly in September 2024

The most recent data from the S&P CoreLogic Case-Shiller US National Home Price Index shows a 0.10% decline for the most recent month. This was the second consecutive monthly decline for the index. Despite the recent easing of home prices, the index is still up by 3.89% over the past year. See index details at SPGlobal.com.

Mortgage rates may be leveling off in late November 2024

30-year mortgage rates dipped slightly last week, falling by three basis points to 6.81%. More significantly, the past month has seen mortgage rates stabilize somewhat after a sustained climb. Over the past four weeks, mortgage rates have fluctuated within a range of just six basis points. Previously, 30-year rates had risen by 71 basis points in just six weeks. It’s a bit of a different story for 15-year mortgage rates. After appearing to stabilize over the previous four weeks, 15-year rates jumped by eight basis points last week to reach 6.10%. See mortgage rate data at FreddieMac.com.

Consumer confidence improves again in November 2024

The Conference Board’s Consumer Confidence Index rose for a second consecutive month in November. Both the component of the index that reflects current conditions and the component that reflects future expectations showed improvement. The Present Situation Index was up by 3.5% from the prior month. The Expectations Index was up more modestly, rising by just 0.4%. Even though it made little progress in November, the Expectations Index remains well above the level traditionally associated with approaching recessions. The Expectations Index had spent most of the time from late 2021 through early 2024 at a level suggesting a recession was imminent. However, it has strengthened considerably in recent months. See details at Conference-Board.org.

Americans move south to be closer to family and friends

The National Association of Realtors reported that the South was the most popular destination for people who relocated recently. 46% chose the South, compared to 25% who moved to the West, 18% to the Midwest and 11% to the East. Among people relocating, being closer to family and friends was the leading reason for the location they chose. 30% said this drove their decision. Getting more home for the money was the second biggest reason behind the location people chose, with 21% citing this as their primary goal. See details at NAR.Realtor.

GDP growth estimate holds steady

The second quarterly estimate of GDP was in line with the advance estimate released a month ago. Both estimates showed a 2.8% inflation-adjusted annual growth rate for the third quarter of 2024. This represents a mild cooling of growth from the second quarter’s 3.0% growth rate. Still, this marks the tenth consecutive quarter of inflation-adjusted GDP growth. See GDP report at BEA.gov.

Most consumers intend to use credit smartly in the 2024 holiday season

A consumer poll by TD Bank found that many consumers plan to use a couple of money-saving spending techniques this holiday season. 42% say they will use debit cards this holiday season, compared to 34% who expect to use a credit card. Using a debit rather than a credit card eliminates the risk of incurring interest charges by carrying a credit card balance. Also, 62% of consumers who plan to use a credit card or personal loan this holiday season expect to pay off their balances in full by January. See summary at ABA.com.

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After a sustained drop, 30-year mortgage rates have risen for four straight weeks. Home prices also continue to rise. It seems that buyers cannot get a break.

Mortgage rates pose challenges for would-be homebuyers again

In late September 2024, it seemed that market conditions were finally cooperating for buyers. 30-year mortgage rates had fallen steadily for five months to 6.08%. That was 1.71% lower than their peak of 7.79% reached at the end of October 2023. That kind of drop in mortgage rates has a huge impact on housing affordability. 6.08% was the lowest 30-year mortgage rate since September 2022.

Seemingly, this created a window for buyers to get into the market at more affordable mortgage rates. Unfortunately, that window slammed shut quickly. In October, 30-year mortgage rates rose for four straight weeks. In total, that pushed rates 0.46% higher.

The unusual dynamic driving prices

It’s not just mortgage rates pricing many would-be buyers out of the market. The average home price in the US has had year-over-year increases for 15 months in a row. The average home price is $404,500 and rising.

What’s unusual about these rising prices is that they come when home sales volume has been falling. Normally, prices rise when the housing market is hot. Instead, prices have gone up while sales have been lackluster. The explanation for this dynamic has been that the inventory of houses available for sale has been very limited. Current homeowners with low rates on their existing mortgages have been reluctant to give up those low rates by selling.

There is hope for people who want to buy a home. Over the past year, the inventory of homes on the market has risen to the equivalent of 4.3 months’ worth of sales volume. A year ago, it was just 3.4 months’ worth. Theoretically, a greater supply should lead to lower home prices – or at least slow the steady price rise.

How much better can you expect conditions to get?

Homebuyers waiting for prices to come down before jumping into the housing market may find the the odds are stacked against them.

The S&P CoreLogic Case-Shiller US National Home Price Index is a measure of changes in housing prices dating back to the late 1980s. Of the 36 full calendar years for which returns of this index are available, home prices have declined in just seven. Five of the seven annual declines resulted from the housing crisis and the Great Recession. These conditions made it difficult for many Americans to make ends meet, let alone qualify for a mortgage.

As long as inflation remains controlled, mortgage rates could come down from their current level. However, since the long-term historical average 30-year mortgage rate of 7.72% is higher than current mortgage rates, the odds are against a return of 3% or 4% mortgages.

What homebuyers can do to improve their prospects

Rather than discourage would-be home buyers, these sobering statistics should help set realistic expectations. Since a dramatic drop in home prices or mortgage rates is unlikely, people hoping to buy a home should focus on doing things they can control to put themselves in a better financial position.

• Keep your rent as low as possible. It’s understandable that people who have been frozen out of the housing market might want to compensate by treating themselves to a nicer apartment or other rental property. However, raising housing expenses in a way that doesn’t create equity does not help build long-term wealth.
• Minimize financial commitments. Maintain as much financial flexibility as possible so you are ready to act when an opportunity to buy a home arises. This means avoiding expensive long-term financial commitments. From car loans to subscriptions, you should look to keep your monthly financial obligations low.
• Work on your credit score. While waiting for a chance to buy a home, do everything you can to get your credit record in great shape. Doing that can qualify you for a better mortgage rate, making a home more affordable.
• Save for a bigger down payment. This should be a by-product of keeping your rent and other financial obligations as low as possible. A bigger down payment reduces the amount you must borrow to buy a home. It could also qualify you for a lower mortgage rate.
• Follow local price trends. Even if you are not ready to buy a house, get in the habit of periodically scanning real estate listings. This helps you know which neighborhoods are pricey and which are more affordable. Also, knowing price trends helps you recognize a bargain.
• Do some test shopping. In addition to following real estate listings, occasionally go to open houses to see what you like and don’t like in a home. Especially if you’re buying a home with a spouse or other partner, seeing some actual properties will give you a better feel for what to look for when the time comes for you to start home shopping for real.

The current landscape may seem daunting for homebuyers, but taking proactive steps today can help you seize opportunities when they arise. By staying informed and prepared, you can navigate these challenging times and make your homeownership dreams a reality.

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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.

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Credit conditions continue to worsen in September 2024

The latest TransUnion Credit Industry Snapshot showed consumers continued to take on more debt in September, even as they increasingly struggled to make payments. During the month, balances owed rose for credit cards, mortgages, and unsecured personal loans. Meanwhile, delinquency rates rose for all those products. Delinquency rates measure the percentage of borrowers whose payments are overdue. Subprime customers showed an especially steep jump in late credit card payments in September. The percentage of that market segment is at least 90 days late, with late payments rising from 19.07% to 22.38% during the month. See details at TransUnion.com.

IRS warns about scams linked to hurricane relief

Hurricanes Helene and Milton have left more than physical damage in their wake. The IRS has warned consumers that scams disguised as fundraisers for fake hurricane relief charities are prevalent. These scams aim to get sensitive personal and financial information from people, such as Social Security, credit card, and bank account numbers. The IRS advises people to check out any supposed charity before giving money or information. You can do this using an IRS search tool that shows an organization’s tax-exempt status and its eligibility to accept tax-deductible contributions. See details at WRAL.com.

Oklahoma bank becomes second to fail in 2024

The FDIC announced that the Office of the Comptroller of the Currency, a bank regulator, had shut down the First National Bank of Lindsay. The FDIC arranged for the First Bank & Trust Co. of Duncan, OK, to take over the failed bank’s deposits. The First National Bank of Lindsay was a relatively small bank with under $100 million in customer deposits. An alleged fraud was blamed for the failure. It is the second bank to fail in 2024 and the first since April 2024. See details at FDIC.gov.

New rules on handling consumer financial data

The Consumer Financial Protection Bureau (CFPB) has rolled out new rules about how banks and other financial companies must handle consumer data. The rules allow consumers to move their financial data from one institution to another. This should make changing banks and other providers easier. The proposal also makes it easier for consumers to pay vendors directly from their bank accounts rather than relying on third-party payment services. Another provision dictates that financial companies should use data only to provide services the customer has signed up for and not for marketing unrelated products. Because of the complexity, the new rules will be rolled out slowly, beginning in April of 2026. See details at ConsumerFinance.gov.

Credit card fraud continues to evolve

Visa’s Fall 2024 biannual report on scam threats highlights the prevalence and variety of credit card fraud. One of the threats the report highlights is a revival in the physical theft of credit cards. Today’s thieves try to turn a stolen card into cash as quickly as possible by using it to buy gift cards before the card’s owner has noticed the theft. Another common scam is impersonating government employees to lure victims into making cash payments. The report notes that from 2022 to 2023, there was a 90% increase in losses from cash payments due to this approach. Also, scammers get around multi-factor authentication by infecting user devices with malware to intercept messages and provide temporary authentication codes. Visa reports investing $11 billion in secure technology and infrastructure over the past five years. See report at Visa.com.

Leading economic indicators decline

The Conference Board announced that its Leading Economic Index (LEI) for the US declined by 0.5% in September 2024. The LEI signals potential turning points in the economic cycle. September’s drop in the LEI follows a 0.3% decline in August. Over the past six months, the LEI has fallen bf 2.6%. That marks an accelerating decline compared to the 2.2% decline over the previous six months. Weakness in factory orders was cited as a leading factor in the recent decline. See details at Conference-Board.org.

Home sales fall as home prices rise

Home sales fell by 1% in September 2024 and 3.5% over the past twelve months. Typically, falling sales activity is accompanied by falling prices. However, home prices have risen by 3% over the past year. Home prices rose in all four major regions of the US, while sales volume fell in all regions except the West. The pairing of increasing prices and falling volume has been attributed to a scarcity of homes for sale. That dynamic may change, as unsold inventory has risen from 3.4 months’ supply to 4.3 months over the past year. See home sales report at NAR.Realtor.

Mortgage rates continue to climb in October 2024

30-year mortgage rates rose by 0.10% last week to reach 6.54%. That marked the fourth consecutive weekly increase for 30-year rates. Those rates are now 0.46% higher than when the rising streak started. Even so, 30-year rates are still 0.07% lower than when the year began. See rate details at FreddieMac.com.

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Dockworker strike on hold

The International Longshoremen’s Association and port operators reached a tentative deal to end a strike involving tens of thousands of dockworkers across 36 ports in the eastern United States. Though the strike was just three days old, it was already causing a backlog of anchored ships waiting to be unloaded. This threatened to cause supply chain disruptions like those resulting from the pandemic, which contributed heavily to the inflationary spike in 2022. Still, the settlement may have inflationary consequences, calling for a 62% wage increase over six years. Also, it’s important to note the resolution may only be temporary, as some remaining issues were tabled until the current contract expires next January 15. See article at Reuters.com.

45 months of consecutive job growth

The US economy added 254,000 jobs in September 2024, exceeding the average monthly gain of 203,000 over the past year. Adding to the good news is that job growth estimates for July and August were revised upward by a combined 72,000 jobs. The US has now enjoyed 45 consecutive months of job growth. See the Employment Situation report at BLS.gov.

Bank of America suffers widespread outages

Many Bank of America customers reported having difficulty accessing their account information online. Some reported outages, while others could access their accounts but found specific problems. These included inaccurate balances and some features of the app/website not functioning. The complaints spiked shortly after 1 pm on October 2 and fell off sharply as the bank worked to resolve the problem. See article at UPI.com.

Hurricane Helene estimated to be costliest storm ever

As experts assess the damage done by Hurricane Helene, the estimated price tag keeps rising. AccuWeather now estimates the economic impact could be between $145 billion and $160 billion. In addition to the direct effect on several states along the path of the hurricane, the damage could disrupt the national economy. The extended interruptions of agriculture, manufacturing and transportation in the Southeast are likely to be a drag on US Gross Domestic Product. In addition, the shortages resulting from those interruptions may snarl supply chains, resulting in inflationary scarcity of some items. See article at Newsweek.com.

Pause in mortgage rates downward trend

30-year mortgage rates rose last week for the first time since mid-August. However, the increase was only slight. 30-year rates rose by 0.04% to 6.12%. To put that in perspective, 30-year rates have fallen by a total of 0.49% since 2024 began and by a total of 1.67% since peaking in late October of 2023. 15-year rates also rose last week, climbing 0.09% to 5.25%. See rate details at FreddieMac.com.

Employee length of tenure declines

A new survey of employee tenure found that Americans are not staying with their employers for as long as they did in the past. The average tenure of American employees fell below four years for the first time since 2002. The current tenure of 3.9 years is down from the previous survey figure of 4.1 years in 2022 (the survey is conducted every two years). Men tend to stay with their employers longer than women. Men now have an average tenure of 4.2 years, compared to 3.6 years for women. Both figures are down in the most recent survey. See news release at BLS.gov.

Pending home sales rose in August 2024

Pending home sales were up by 0.6% in August. Despite this short-term improvement, pending home sales were still down by 3% from a year earlier. The Midwest, South and West regions all showed higher pending home sales last month, while the Northeast suffered a 4.6% decline. The West was the only region with increased pending home sales over the past 12 months. Pending home sales are considered a leading indicator of actual home sales, as they are measured when purchase contracts are signed as opposed to when the transactions finally close. See details at NAR.Realtor.

Job openings rose in August 2024

The total number of job openings in the US rose to 8.040 million in August. That’s up from 7.711 million in July but far fewer than the 9.358 million in August 2023. Job turnover has slowed to 4.997 million total separations in August. That’s down from 5.314 million in July to 5.609 million in August 2023. Total separations include people who left their jobs voluntarily and those who were fired. More moderate numbers of job openings and separations may represent more stability for the US job market. The ratio of unemployed persons to job openings was 0.9 in August. That’s more in line with pre-pandemic levels than the low of 0.5 reached in 2022 and early 2023. Previously, the unusually low ratio of job-seekers to jobs contributed to the flare-up of inflation in 2022. See news release at BLS.gov.

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Economic indicators declined in July 2024

The Conference Board’s Leading Economic Index (LEI) declined by 0.6% in July. The LEI has fallen by 2.1% over the past six months, slower than the -3.1% change over the prior six months. With this slight improvement over the past four months, the LEI has no longer been signaling a recession. Before that, the LEI was at levels generally associated with a coming recession for several months. See details at Conference-Board.org.

Newly-released Fed minutes point to September 2024 rate cut

The recent release of minutes from the last meeting of the Federal Open Market Committee (FOMC) adds to the belief that the FOMC will cut rates at its September meeting. The FOMC is the sub-group of the Federal Reserve that makes interest rate decisions. The new minutes show a growing chorus of Fed officials calling for a rate cut soon. Some even supported a rate cut at the previous meeting. Meanwhile, concern that a premature rate cut could revive inflation seems to be fading. The FOMC’s next meeting takes place on September 17 and 18. See article at Reuters.com.

Credit card delinquencies and balances rose in July 2024

Serious delinquency rates on credit cards rose during July to 2.22%. Payments that are 90 days or more overdue are defined as being seriously delinquent. Serious delinquency rates on auto loans and mortgage rates also rose. In addition to rising delinquency rates, another sign of credit risk is that the average credit card balance rose in July. The average credit card balance per consumer rose from $6,291 to $6,304 in July. Credit card companies are leaning into this risk to some extent, as the average credit line available to consumers rose from $26,906 to $26,986 last month. The increase in credit risk is seen most acutely among customers with less-than-prime credit scores. Over the past year, delinquency rate changes among prime, prime plus and superprime customers have been negligible. However, delinquency rates for near-prime customers (credit scores of 601 to 660) are up by nine basis points over the past year, and delinquency rates for subprime customers (credit scores of 300 to 600) are up by 18 basis points. See details at TransUnion.com.

Existing home sales losing streak ended in July 2024

Existing home sales rose 1.3% in July to a seasonally adjusted annual pace of 3.95 million. Previously, home sales had declined for four straight months. Year-over-year, home sales are down by 2.5%. A recent drop in mortgage rates could help revive home sales. However, this drop in mortgage rates is offset somewhat by a rise in the median home price. The median price for an existing home is now $422,600. That’s 4.2% higher than it was a year ago. See news release at NAR.realtor.

Banks challenge new credit card law in Illinois

A group of banks has sued to challenge a new law in Illinois that prevents credit card companies from charging merchants when customers pay by credit card. Those interchange fees finance the cost of credit card companies processing transactions, customer rewards, and fraud protection. They average about 2% per transaction. The banks bringing the lawsuit claim the new rule violates federal banking regulations. See article at Yahoo.com.

Rising home prices push home equity value to record high

The equity mortgage holders own in their homes has reached a record high of $17.6 trillion. Rising equity has reduced the debt-to-equity ratio of mortgaged homes to 44.1% as of June, down from 44.6% in the first quarter. That’s the third-lowest proportion of debt in the past 20 years. Assuming lenders require homeowners to maintain an equity cushion of 20%, this would give mortgage holders a record potential of $11.5 trillion they could tap into. By that standard, 32 million mortgage holders could tap into at least $100,000 in equity, and 4.6 million could borrow at least $500,000 against home equity. See article at ICEMortgageTechnology.com.

Wall Street growth outpaced the U.S. economy

The total value of U.S. investments has grown to 6 times that of the nation’s Gross Domestic Product (GDP). The value of those investments has been spurred by a 22% gain in the S&P 500 last year, followed by a 16% gain so far this year. This puts today’s ratio of investment values to GDP near the record high of 6.3, reached in June 2021. The lowest ratio was 2.9 times GDP back in the 1980s. See article at Morningstar.com.

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• Last week’s news roundup August 17, 2024
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US economy uptick in Q2 2024

US Gross Domestic Product (GDP) rose at a 2.8% annual rate in the second quarter of 2024, after adjustment for inflation. That’s twice the growth rate of Q1. GDP has now grown for eight consecutive quarters. Disposable personal income grew at a faster pace than inflation during Q2. Nevertheless, the personal savings rate fell from 3.8% to 3.5% during the quarter. These figures are all from the advance GDP estimate by the Bureau of Economic Analysis. The estimate is to be updated near the end of the next two months. See GDP data at BEA.gov.

Inflation measure remains subdued in June 2024

The Personal Consumption Expenditures (PCE) price index rose by just 0.1% in June. That’s up from no change in May 2024 but slower than the pace of the past 12 months. Price changes reflected the ongoing contrast between goods and services. The price of goods declined, but services increased as labor shortages created inflationary pressure. The PCE price index is the preferred measure of inflation used by the Federal Reserve to measure its progress in calming price increases. See details at BEA.gov.

Visa stopped 80 billion fraudulent transactions in 2023

A regional risk management officer for Visa reported that the credit card company prevented 80 million fraudulent transactions last year. Those transactions would have totaled $40 billion in losses. Visa credits its investments in technology with helping to limit fraudulent transactions when cybercrime is booming. In 2025, cybercrime is expected to total $10.5 trillion worldwide. That makes cybercrime bigger than all but two national economies. See article at Reuters.com.

Half of big banks have operational vulnerabilities

In an assessment of 22 large banks, the Office of the Comptroller of the Currency found 11 had operational flaws. These are flaws that could potentially put those banks at risk. Operational risks don’t directly involve the banks’ core investment or lending business but secure the infrastructure that supports those business lines. The Office of the Comptroller of the Currency supervises banks with assets of $50 billion or more. See article at MSN.com.

June 2024 mixed month for credit performance

The June 2024 Credit Industry Snapshot from TransUnion shows that credit performance varied last month, depending on the product type. New delinquencies increased for auto loans and credit cards. However, they decreased for mortgages and unsecured personal loans. Subprime long-term delinquencies acclined for credit cards, pausing a trend that has seen them steadily increase over the past few years. See details at TransUnion.com.

FTC investigates how personal data used to adjust prices

The Federal Trade Commission (FTC) has ordered Mastercard, Chase, and six other companies to provide information on how they adjust prices for different customers. It is believed that the companies use a variety of customer-specific factors to set prices. These factors include demographics, location, and browsing history, among other things. Companies then use artificial intelligence and other technology to determine prices for individual customers. These tactics aren’t necessarily illegal, but the FTC seeks more information to determine whether customer privacy is violated. See article at TheHill.com.

Widespread adoption of Health Savings Accounts

A new report on Health Savings Accounts (HSAs) found that they have gained popularity across all age groups. In total, Americans own more than 37 million HSAs, amounting to $123 billion. People in their early 30s have the greatest number of HSAs, but people in their late 60’s have the largest average HSA balance, at $6,483 per account. HSAs are a way of accumulating tax-advantaged savings for health insurance deductibles and other out-of-pocket medical expenses. See report at Devenir.com. 

New home sales declined in June 2024

Newly constructed homes sold at a seasonally adjusted annual pace of 617,000 in June. That’s down by 0.6% from May and 7.4% from June 2023. Year-over-year, the biggest decline in new home sales occurred in the Northeast, where sales were down by 63.6%. The South also experienced a double-digit decline, with a 12.2% drop in sales volume. In contrast, sales in the Midwest were up by 32.8% compared with last June. The West experienced a slight increase in volume, at 2.8%. See Monthly New Residential Sales report at Census.gov.

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• Last week’s news roundup July 20, 2024
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1. Credit cards lead to rise in delinquencies
2. Credit cards from large banks are more expensive than those from smaller issuers
3. German central bank says their country is probably in a recession
4. US companies show cost-cutting trend
5. Capital One announces Discover acquisition
6. 2023 saw the most work stoppages in more than 20 years
7. Mortgage rates continue to leap higher in reaction to inflation
8. Home sales finally perk up

Credit cards lead to rise in delinquencies

Late payments continued to rise for most forms of consumer credit in January 2024, led by credit card accounts. Delinquency rates rose for credit cards, auto loans, and mortgages, though they declined slightly for personal loans. The percentage of credit card accounts that are 30 days or more overdue has now increased for eight months in a row. One positive sign is that average credit card balances declined slightly last month, though this may explain why retail sales fell sharply in January. There is an extreme split in delinquency problems between prime and subprime credit card accounts. Serious delinquency (90 days or more overdue) rates for prime customers remain near zero, while those for subprime customers are now 21.22%. See report at TransUnion.com.

Credit cards from large banks are more expensive than those from smaller issuers

The Consumer Financial Protection Bureau (CFPB) found a significant difference in credit card interest rates and fees based on the issuer’s size. The CFPB found that the 25 largest credit card issuers charge rates that are 8 to 10 basis points higher than small or medium-sized institutions. 9 of these 25 large issuers have at least one product with a 30% or higher credit card rate. The CFPB estimates that these rate differences could cost customers of larger credit card companies an extra $400 to $500 a year in interest charges. Larger issuers are also more likely to charge annual fees. 27% of credit cards from large firms have an annual fee, compared with just 9.5% of those from small issuers. The average annual fee from large issuers is $157, compared with $94 for credit cards from small issuers. See details at ConsumerFinance.gov.

German central bank says their country is probably in a recession

The Bundesbank, which performs functions in Germany similar to those of the Federal Reserve in the United States, reported that Germany appears to have entered an economic recession. The central bank reported that Germany’s growth has been flat to negative for four consecutive quarters. It said consumers have been cautious about spending, while higher interest rates have made businesses reluctant to invest. Germany is Europe’s largest economy. On the heels of last week’s news that the United Kingdom and Japan are also in recessions, a picture of weak global demand in 2024 is emerging. See article at Reuters.com.

US companies show cost-cutting trend

Several major US employers have recently announced layoffs and other cost-cutting measures. Nike, Mattel, and JetBlue are among the corporate giants cutting jobs. Macy’s is closing some store locations, United is eliminating some in-flight meals and auto makers are reducing investments in electric vehicles. The trend is reportedly due to inflation fatigue among consumers. With Americans no longer willing or able to pay fast-rising prices, companies are looking to rein in those prices by cutting costs. See article at CNBC.com.

Capital One announces Discover acquisition

Capital One plans to buy Discover Financial Services in a deal worth $35 billion. Discover shareholders will receive Capital One stock in exchange for their current stock. Capital One and Discover are two of the largest non-bank credit card issuers. Analysts say the acquisition may give Capital One more power to compete with dominant payment giants MasterCard and Visa. However, the deal still requires regulatory approval, which may be contentious. See article at ABCNews.com.

2023 saw the most work stoppages in more than 20 years

The Bureau of Labor Statistics reported that more labor disputes led to major work stoppages last year than in any year since 2000. There were 33 major work stoppages in 2023, roughly twice the average of 16.7 over the past 20 years. Work stoppages are typically signs that workers feel they have the bargaining power to risk a strike. Tellingly, 86.7% of last year’s work stoppages were in the service sector, which indicates the general labor shortage for service jobs. A higher number of work stoppages may be good news for worker wages, though it also creates more inflation pressure. See news release at BLS.gov.

Mortgage rates continue to leap higher in reaction to inflation

For the second consecutive week, 30-year mortgage rates jumped by 0.13%. That puts rates at 6.9%, the closest they’ve been to 7% since mid-December. 15-year mortgage rates were up even more sharply, rising by 0.17% this week and by 0.39% over the past two weeks. 15-year rates are now at 6.29%. The sudden rise in mortgage rates is in reaction to last week’s Consumer Price Index and Producer Price Index reports, which show inflation is proving more persistent than previously thought. See mortgage data at FreddieMac.com.

Home sales finally perk up

According to the National Association of Realtors, existing home sales rose by 3.1% in January. This bucks a longer-term trend that has seen home sale volume decline. It remains to be seen whether the revival of sales can survive the steep increase in mortgage rates since the end of January. See press release at NAR.Realtor.

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• Last week’s news roundup February 17, 2024
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