Personal finance weekly news roundup August 24, 2024 ~ Credit Sesame

Credit Sesame’s personal finance news roundup August 24, 2024. Stories, news, politics and events impacting personal finance during the past week.

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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