Category: US Economy

Nearly half of Americans have anxiety over their debt

This is causing physical and mental distress

Adults in the U.S. over the age of 18 say they have an average of $29,800 in personal debt (not including mortgages), and 15% of Americans say they think they will be in debt for the rest of their lives.

According to Northwestern Mutual’s 2019 Planning and Progress Study, this is still an improvement from last year’s average of $38,000 in personal debt.

“The road to financial security is long, even in the best of circumstances,” Emily Holbrook, senior director of planning at Northwestern Mutual, said in a release. “By carrying high levels of personal debt that road gets even longer, often requiring all kinds of detours and other twists and turns. The fact that there’s been some year-over-year improvement in debt levels is good, but the numbers still remain worryingly high.”

An average of 34% of people’s monthly income goes towards paying off debt, the study showed, while another 34% of respondents said they aren’t sure how much of their monthly income goes towards paying off their debt.

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This is how America’s housing affordability is impacting credit quality

Affordability has returned to average historical levels, and it’s having a ripple effect.

It’s official: The era of unusually affordable housing has ended. Well, according to a recent Moody’s Investors Services analysis.

The organization claims that America’s housing affordability has returned to average historical levels, therefore impacting credit quality across numerous housing-related sectors.

“Homes are no longer relatively cheap on a national basis, and certain market segments are in worse shape, reflecting supply-and-demand imbalances stemming from the 2007 through 2012 housing slump, as well as demographic changes and the long U.S. economic expansion and its unevenly spread benefits,” Moody writes. “Reduced affordability is also a lingering issue in the rental market, where the effects are in some ways more severe.”

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Slower, More Sustainable U.S. Economy Emerges

The Federal Reserve’s dovish pivot has been reinforced by the abundant liquidity in the capital markets, according to David Shillington of Marcus & Millichap Capital Corp.

Amid ongoing strength in the domestic economy, concerns over the global economy present a more balanced approach to the growth outlook for this year. Weaker data in Europe and Asia, coupled with the risks associated with a broader U.S. trade war with China, represent potential economic downsides.

As a result, the rapid economic expansion that dominated the U.S. economy in 2018 has largely been replaced with a slower and more sustainable scenario. The Federal Reserve has eyed these developments, putting further rate hikes for this year on hold at its latest meeting in March. The Fed also announced plans to end quantitative tightening, its process of reducing its balance sheet, by September of this year. This follows a tumultuous fourth quarter in financial markets, with spiking volatility in equity markets leading to a steep drop in 10-Year Treasury yields from nearly 3.25 percent to 2.5 percent, the lowest level since the beginning of 2018. The yield curve has begun to price in a much more dovish Fed, with flattening interest rates across a range of maturities leading to a partial inversion in some short-dated issues.

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This housing market clue predicts pending economic slowdown

A key indicator of economic health is steadily declining, and it’s raising red flags.

When it comes to the health of the economy, the housing market is the canary in the coal mine, providing clear and early clues of pending trouble. And that’s why analysts track its performance intently, looking at a multitude of indicators that might signal the looming recession some are forecasting.

Now, one critical clue from the housing market has emerged to suggest economic growth is likely to backslide, and that is a steady decline in single-family authorizations.

In essence: Construction activity appears to be slowing.

Single-family housing authorizations – what some call a key predictor of economic recessions – represent building permits requesting permission to commence construction. In contrast, housing starts signal that construction has already begun.

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Existing home sales plummet in December

What will the ongoing government shutdown mean for future sales?

After seeing gains in previous months, existing home sales dropped suddenly in December, seeing double-digit losses from the year before.

Both October and November saw gains in existing home sales, but that all changed in December, according to the latest Existing Home Sales report from the National Association of Realtors.

Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 6.4% from November to a seasonally adjusted rate of 4.99 million sales in December. This is down a full 10.3% from December 2017’s 5.56 million sales.

Realtor.com Chief Economist Danielle Hale explained this is the first time in three years that existing homes sales slipped below the 5 million mark.

Due to the ongoing government shutdown, some might wonder what the effect has been on real estate, and if it is to blame for the decrease in home sales. NAR explained that it did not, saying, “The partial shutdown of the federal government has not had a significant effect on December closings,” said NAR President John Smaby.

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U.S. Home Prices at Least Affordable Level Since Q3 2008

ATTOM Data Solutions, curator of the nation’s premier property database, today released its Q2 2018 U.S. Home Affordability Report, which shows that the U.S. home prices in the second quarter were at the least affordable level since Q3 2008.

The report calculates an affordability index based on percentage of income needed to buy a median-priced home relative to historic averages, with an index above 100 indicating median home prices are more affordable than the historic average, and an index below 100 indicating median home prices are less affordable than the historic average. (See full methodology below.)

Nationwide, the Q2 2018 home affordability index of 95 was down from an index of 102 in the previous quarter and an index of 103 in Q2 2017 to the lowest level since Q3 2008, when the index was 86.

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Economy Watch: Most Metro Areas See Declining Unemployment

Unemployment rates were lower in May 2018 than a year earlier in 350 of the 388 U.S. metropolitan areas, higher in only 20 areas, and unchanged in 18 areas, the Bureau of Labor Statistics reported on Wednesday, June 27. Ninety-six areas had jobless rates of less than 3 percent—the national rate is currently 3.8 percent—and a mere two areas are suffering unemployment rates of more than 10 percent.

Farmington, N.M., had the largest year-over-year unemployment rate decrease in May, down 2.2 percentage points. Another 52 metro areas had rate declines of at least 1 percentage point since a year ago. The largest year-over-year unemployment rate increase occurred in the Morgantown, W.Va., metro area (up 0.8 percentage points).

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Millions of U.S. Homeowners Still Under Water on Mortgages

(Bloomberg)—A staggering number of American homeowners remain under water on their mortgages a decade after the housing bubble burst.

Almost 4.5 million households — or 9.1 percent — owed more than their homes are worth in the fourth quarter of 2017, according to data firm Zillow, with an estimated 713,000 owing at least twice as much as their property’s value.

While the percentage is declining, families in communities with stagnant property values are “trapped in their homes with no easy options to regain equity other than waiting,” said Aaron Terrazas, a senior economist at Zillow.

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Economy Watch: Inflation Heats Up in May

The Consumer Price Index increased 0.2 percent in May after rising 0.2 percent in April, the Bureau of Labor Statistics reported on Tuesday. Over the last 12 months, the all items index rose 2.8 percent, which is the fastest pace for inflation in about six years.

The price of gasoline and shelter were the largest factors in the increase in the May all items index, as they were in April, the BLS said. The price of gas increased 1.7 percent for the month more than offsetting declines in some of the other forms of energy. Overall, the cost of energy was up 0.9 percent during May.

Other sometimes drivers of inflation were more subdued. The cost of medical care rose 0.2 percent in May, while the cost of food was unchanged month-over-month. Without energy or food, the core rate of inflation was also 0.2 percent for the month, but rose 2.2 since the same month of last year.

If that rate of inflation stays, it will eat up all of the already meager gains that workers have been making recently, which could have an impact on consumer spending. In May, the BLS reported separately, average hourly earnings for all workers rose by 8 cents to $26.92 per hour. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent.

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Economy Watch: More Americans Traveling Further to Work Than 10 Years Ago

The ranks of “super commuters” has grown in U.S. metro areas, from from 2.4 percent of all commuters in 2005 to 2.8 percent in 2016, according to a recent Apartment List analysis of Census Bureau data. Nationwide, one in 36 commuters are super commuters, meaning that they spend 90 or more minutes traveling to work each day, either hours on public transportation or slogging through traffic.

The share of super commuters is highest in expensive metros with strong economies—New York, San Francisco, Washington, D.C., Atlanta and Los Angeles— and in their surrounding areas. In Stockton, Calif., for instance, 10 percent of commuters travel more than 90 minutes to work each day, the highest share among U.S. metros. New York has a 6.7 percent share and San Francisco has 4.8 percent.

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