Personal Finance

Record growth in home prices has made owning a home less affordable than at any point since the financial crisis. The median American household would need 32.1% of its income to cover mortgage payments on a median-priced home, according to the Federal Reserve Bank of Atlanta. That is the most since November 2008, when the same outlays would eat up 34.2% of income. The Wall Street Journal reports:

Supercharged home prices in markets across the country are canceling out the impact of modestly higher incomes and historically low interest rates, two factors that typically make owning a home more affordable. Prices rose at a record pace for the fourth consecutive month in July, driven by a shortage of houses for sale. Higher prices require buyers to take out larger loans, essentially signing them up to make larger mortgage payments each month for years.

The Atlanta Fed calculates affordability using a three-month average of median home prices from CoreLogic Inc. and median household incomes based on census data. In July, the latest month in the Atlanta Fed’s calculations, median home prices were $342,350, up 23% from the year before. Median incomes were $67,031, up 3%.

Declining affordability will have the biggest impact on buyers shopping for their first homes, who will have to sign up for larger monthly payments, buy less desirable homes or step back from the market altogether, economists said.

The wealthiest 1% of Americans controlled about $41.52 trillion in the first quarter, according to Federal Reserve data released Monday. Yet the bottom 50% of Americans only controlled about $2.62 trillion collectively, which is roughly 16 times less than those in the top 1%. CNBC reports:

Wealth across all U.S. households increased during the first quarter. Overall, the net worth of households and nonprofits rose to $136.9 trillion during the first quarter, a 3.8% increase from the end of 2020, according to separate data published by the Federal Reserve on June 10, 2021. But those gains weren’t distributed equally.

The recent gains in household wealth, in particular, can be largely attributed to stock holdings, which were up about $3.2 trillion, according to the Fed. The rise in home values also played a role, with real estate holdings increasing by $1 trillion.

But some critics contend that the Fed’s low interest rate policieshave boosted the stock market, giving an edge to those who own stocks and investments. The wealthiest 10% of Americans, for example, own about 89% of stocks and mutual funds held in the U.S. as of the first quarter of 2021, according to Fed data. The bottom 50% of U.S. households hold around 0.5%.

Some 931 million tons of it went to waste in 2019, according to the United Nations Environment Programme. Individual households were responsible for more than half of that, with the rest coming from retailers and the food service industry. New estimates show that about 17% of food available to consumers worldwide that year ended up being wasted. The matter is even more urgent when considered alongside another UN analysis that tracks the problem further up the supply chain, and shows 14% of food production is lost before it reaches stores. Waste is happening at every point, from the field to the dinner table.

Food waste and loss are responsible for as much as 10% of global emissions, according to the Intergovernmental Panel on Climate Change. If it were a country, this discard would rank third in the ranking of the world’s sources of greenhouse gases, after China and the U.S. Among the most effective climate solutions, non-profit Project Drawdown ranks cutting food waste ahead of moving to electric cars and switching to plant-based diets. Thursday’s UNEP report suggests the amount of food wasted by consumers could be about double the previous estimate. The analysis conducted by the UN’s Food and Agriculture Organization in 2011 relied on data from fewer countries.

Now that the pandemic is starting to come to an end and you are left with the question of how to get your finance back on track? You are not alone! Looking for easy ways to cut down your debt? Put some easy strategies and habits in place to improve your finance picture.

Before you start repaying debt, take a moment to identify the kind of debt you have — whether it’s credit card debt, student loan debt, mortgage debt or something else — and determine how much debt you have. Understanding the type and amounts of your loans can help you come up with a personalized plan for debt payoff.

Here are 10 ways to pay off debt:

• Create a budget. Pay off the most expensive debt first.
• Pay more than the minimum balance.
• Take advantage of balance transfers.
• Halt your credit card spending.
• Put work bonuses toward debt.
• Delete credit card information from online stores.
• Sell unwanted gifts and household items.
• Refinance high interest rate loans.
• Reward yourself when you reach milestones.

This is the easiest one for homeowners. Refinance your current mortgage and lower your monthly payments. It is like giving yourself a raise! If you could use an additional $200-$500 per month, this may be an option for you!

If you look beyond the memes, cat videos, and quirky acronyms (TIL, OP, ELI5) you’ll find a treasure trove of resources that will help you quickly get acquainted with the topics that have long eluded you. For me, even though I worked on Wall Street for nearly 15 years, Reddit is the first place I turn when I have a question about money. Khe Hy writes on Quartz:

To me, here’s what makes good financial advice: objectivity, accuracy, and relatability. With an alien mascot named Snoo, an impossibly sprawling site structure, and user anonymity, Reddit may seem like an unlikely place for the serious business of money. But in fact, it has each of these qualities in spades. 

According to Amazon’s Alexa, Reddit is the sixth most popular site in the US; the site reported 430 million active users at the end of 2019. Reddit is organized into niche communities (known as subreddits that begin with “r/”) with their own guidelines, norms, and moderators covering both mainstream (r/kpop) and obscure (r/namenerds for new parents seeking inspiration) topics. Because users self-select to be active in these communities, Redditors are known to be passionate and have been described as “offbeat, quirky, and anti-establishment.” All these qualities make it a great place for conversations about money. Consider the subreddit Frugal Living (r/Frugal), which shows what allows Reddit to offer better financial advice than many of those other sites: the Redditor community. Frugal Living’s mission statement is to “understand the resources that we have, and [how to spend] them wisely and deliberately” and this subreddit contains actionable tips on eking out that last bit of toothpaste, warnings that Amazon Day is pure marketing, and why you shouldn’t pay for scientific journals. These posts offer encouragement, collaboration, and a relatability that’s hard to find in the traditional financial press, no matter your financial situation. […] One final word of warning: no matter whether financial advice comes from the front page of the internet or the front page of the Wall Street Journal, it’s incumbent upon the buyer to scrutinize the details, lead with skepticism, and, when appropriate, consult with professionals.

Some of the communities that might help you with personal finance on Reddit include: Personal Finance, Frugal Living, Investing, Financial Independence / Retire Early, and Stocks.

There is no doubt that the coronavirus pandemic will change the world. In fact, it already has changed the world, and it will keep going. Many of the reports and forecasts you can see today show devastating losses in some industries. Forecasts from economists and other experts predict a grim future drawing parallels with the Great Depression. Seeing how many businesses are failing because of lockdowns, a tragedy seems inevitable.

However, while this all is happening, some industries are growing and values of some assets are going up. It’s true that many companies are failing, but there are also those that report record increases in revenue. The stock market has all but recovered, largely due to the rapid gain by tech giants.

It’s true that there is a lot of uncertainty still. It’s also a fact that the global economy is going into a dangerous recession. However, while stressful the situation is not necessarily tragic. Changes will continue to spread as investors are reallocating their funds. Businesses will close and others will open. The change in consumer behavior will stick and we can expect to see even more overall digitalization.

But the real question is whether the powers that are going strong will be enough to hold the global economy back from total collapse?

Some Industries Are Doing Very Well Despite the Pandemic

Looking back at previous economic recessions, one thing remains quite stable. As the economy crashes, so do house prices. However, while the COVID-19 crisis is definitely one of the worst, its effect on real estate is different. Home prices continue to rise. In some countries, for example, Germany and South Korea, the housing market is growing so fast that local governments have to implement buyer restrictions. Even in America, which is admittedly struggling during this crisis, real estate value keeps increasing.

For the real estate market, the main reasons for growth are policies and a big change in buyers’ preferences. Lenders have to lower interest rates in response to the crisis. Governments in richer countries also launched policies that offer some leniency, like banning foreclosures for the duration of the pandemic. People also became more interested in purchasing bigger homes with gardens in suburban areas. The latter is, no doubt, in response to many companies accepting remote work as the new norm.

Residential real estate isn’t the only sector that’s doing well. Technology giants and startups alike are enjoying robust growth in this otherwise difficult time. As so many aspects of our everyday lives are getting transferred online, businesses that facilitate this transition are getting an unprecedented boost in interest.

Investors definitely caught on to that. Therefore, they started putting their money into tech companies and other industries that are fueled by the pandemic. Healthcare is definitely at the top there.

Even retail trade isn’t doing too badly. It’s true that the overall consumption level has gone down. This is an expected trend for an economic recession. However, online sales are growing super-fast. Therefore, online retailers, and the ones that were quick to change, are getting bigger revenues despite the pandemic. [Read more…]

The 50 richest Americans now hold almost as much wealth as half of the U.S., as Covid-19 transforms the economy in ways that have disproportionately rewarded a small class of billionaires. Bloomberg reports:

New data from the U.S. Federal Reserve, a comprehensive look at U.S. wealth through the first half of 2020, show stark disparities by race, age and class. While the top 1% of Americans have a combined net worth of $34.2 trillion, the poorest 50% — about 165 million people — hold just $2.08 trillion, or 1.9% of all household wealth.

The 50 richest people in the country, meanwhile, are worth almost $2 trillion, according to the Bloomberg Billionaires Index, up $339 billion from the beginning of 2020.

Covid-19 has exacerbated inequality in the U.S., with job losses falling heavily on low-wage service workers and the virus disproportionately infecting and killing people of color. Meanwhile, many upper-middle class professionals are working from home, watching their retirement accounts rise in value after the U.S. Treasury and Fed pumped stimulus into the economy and markets.

Another key reason for the wealth disparity is that the vast majority of Americans aren’t benefiting from rising stock prices. The bottom 90%’s exposure to the stock market has been dropping for almost two decades. Since peaking at 21.4% in 2002, upper middle class Americans have seen a 10 percentage point decline in their equity interest in companies. A similar pattern is seen among the bottom half.

According to new research from eMarketer, the cable, satellite and telecom TV industry is on track to lose the most subscribers ever. This year, over 6 million U.S. households will cut the cord with pay TV, bringing the total number of cord-cutter households to 31.2 million. TechCrunch reports:

The firm says that by 2024, the number will grow even further, reaching 46.6 million total cord-cutter households, or more than a third of all U.S. households that no longer have pay TV.

Despite these significant declines, there are still more households that have a pay TV subscription than those that do not. Today, there are 77.6 million U.S. households that have cable, satellite or telecom TV packages. But that number has declined 7.5% year-over-year — its biggest-ever drop. The figure is also down from pay TV’s peak in 2014, the analysts said. 

The pay TV losses, as you may expect, are due to the growing adoption of streaming services. But if anything, the pandemic has pushed forward the cord-cutting movement’s momentum as the health crisis contributed to a down economy and the loss of live sports during the first part of the year. These trends may have also encouraged more consumers to cut the cord than would have otherwise.

“Consumers are choosing to cut the cord because of high prices, especially compared with streaming alternatives,” said eMarketer forecasting analyst at Insider Intelligence Eric Haggstrom. “The loss of live sports in H1 2020 contributed to further declines. While sports have returned, people will not return to their old cable or satellite plans,” he added.

NBC News spoke to 21 people who said they were hooked on casino-style apps and had spent significant sums of money. The industry is almost entirely unregulated. NBC reports: