Personal finance weekly news roundup August 31, 2024 ~ Credit Sesame

Credit Sesame’s personal finance news roundup August 31, 2024. Stories, news, politics and events impacting personal finance during the past week.

Fed Chair signals rate cut is coming

In a recent speech before the Federal Reserve Bank of Kansas City, Federal Reserve Chair Jerome Powell said that “the time has come for policy to adjust.” This is the clearest indication yet that the Fed will cut rates at its next meeting, which will take place on September 17 and 18, 2024. The size of that cut is still to be determined. Having waited this long, the Fed may begin cutting rates cautiously with a customary 0.25% rate cut. A larger rate cut would indicate they see the need for more urgent action. On the other hand, a surprise flare-up of inflation data could still deter the Fed from raising rates in September. See article at Yahoo.com.

Key inflation measure ticked up slightly in July 2024

The Personal Consumption Expenditures (PCE) price index rose to 0.2% in July. This follows readings of 0% in May and 0.1% in June. Despite the slight monthly acceleration, the PCE price index increase for the past 12 months remained at 2.5%. The PCE price index is significant because it is the inflation measure the Federal Open Market Committee (FOMC) refers to most often. The FOMC is the Federal Reserve subgroup that makes interest rate decisions. See details at BEA.gov.

Anti-trust practices have kept rents high

The Justice Department filed an anti-trust lawsuit accusing real estate software firm RealPage, Inc. of facilitating anti-trust practices among landlords. The allegation concerns the algorithm RealPage uses to recommend rent levels to landlords. That algorithm bases its recommendation on data about tenants and properties obtained through multiple landlords. The case would seem clear-cut if the landlords colluded directly to set rents. However, RealPage is simply providing information, so the Justice Department may have a harder time demonstrating that this violates anti-trust laws. See article at SFGate.com.

Pending home sales at record low in July 2024

The National Association of Realtors’ index of pending home sales dropped by 5.5% in July to 70.2%. That’s the lowest level since the beginning of the data series back in 2001. All four major regions covered by the index showed a decline in pending sales during July. See article at Yahoo.com.

30-year mortgage rates decreased

30-year mortgage rates extended their downward trend last week. They fell by 11 basis points to 6.35%. That’s their lowest level since May of 2023. 30-year rates are now 0.26% below where they were when the year began and 1.44% below their recent peak of 7.79%, reached in late October 2023. See rate details at FreddieMac.com.

Financial toll of online sports gambling

Two recent academic studies demonstrate the systematic damage legalized sports gambling has on consumer finances. One paper found that legalized gambling has led to higher credit card balances and reduced investment in long-term assets. Another study compared states that legalized gambling with those that did not. It found that in states that legalized gambling, bankruptcies increased by 28% more, and referrals of accounts to debt collectors increased by 8% more than in states that did not legalize gambling. Auto loan delinquencies and the use of debt consolidation loans also increased more in states that legalized gambling. See article at NBCNews.com.

Retailers charging for cash-back transactions

The Consumer Financial Protection Bureau (CFPB) has issued a report raising concerns about the growing practice of charging a fee when customers want to add some cash back to their debit or prepaid card transactions. The CFPB sampled eight large retailers and found three (Dollar General, Dollar Tree/Family Dollar, and Kroger) charge an extra fee when customers take cash back. The CFPB estimates that these three retailers take in over $90 million in fees from this practice annually. The concern is that the fixed-dollar fees often represent a significant percentage of the relatively small amounts people tend to get back. This is a huge burden as the declining number of bank branches and out-of-network ATM fees limit people’s options for accessing their cash. See news release at ConsumerFinance.gov.

New credit delinquencies increase

Early-stage credit delinquencies rose by the largest amount in over four years in July 2024. Early-stage delinquencies are accounts with payments 30 to 59 days past due. Delinquency rates rose over the past year for all credit tiers except Superprime. Lenders and consumers are responding to deteriorating credit conditions by growing more cautious. New credit account originations have declined over the past year for credit cards, auto loans, mortgages, and personal loans. See report at VantageScore.com.

Shoppers are optimistic but choosy

A third-quarter McKinsey survey found that the percentage of consumers optimistic about the economy rose to 41% from 33% in the second quarter. Optimism is especially strong among wealthier and younger consumers, specifically members of the Millennial and Gen Z populations. Despite the optimism, consumers are highly price-sensitive. 76% report changing what they buy to get better prices. That price sensitivity rises to 86% among Millennials and Gen Z. 50% of those younger generations also reported changing retailers to get better deals. See article at Yahoo.com.

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