DAVID LYONS South Florida Sentinel of the Sun
Wherever they go, consumers are seeing price spikes as they buy everything from homes to insurance to plane tickets.
More likely than not, spiraling inflation will continue to feast on wallets long after 2022, according to an economist at Florida Atlantic University.
Across the country, “the real value of workers’ wages will likely fall even further as the Federal Reserve shows no signs of neutralizing worse-than-expected inflation,” said William Luther, an economist and associate professor at the College of Business. of the FAU.
In a new monthly inflation report, Luther and student Morgan Timmann predict that prices will be 11.8% higher in January next year than they were in January 2020, two months before COVID-19 destroys state and national economies.
What does this mean for employees?
Consider the car, one of the largest and most important purchases that most consumers typically make. For a vehicle that cost $50,000 in January 2020, the cost would rise to $53,060 in January 2023 if the Fed hits its 2% inflation target. If it averaged 3%, as the central bank predicted last December, the car would cost $54,700 in January of next year.
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“At 3.7%, as the Fed is currently forecasting, it would cost $55,900,” Luther said. “We don’t pay more because the car is better. It’s the same car. On the contrary, we pay more because the dollars we spend are worth so much less.
The situation is not improving in other categories such as buying a house, where prices continue to rise into the stratosphere, with car insurance and with the price of air travel, which is pushed by rising fuel costs.
At the moment, it is difficult for consumers to play the defensive. Although federal and state labor officials note that wages are rising in some industries because there are more jobs than workers willing to fill them, wages are not rising fast enough to keep pace with prices.
“I think in the short term, it’s pretty clear that inflation has exceeded the Fed’s projections and certainly the wages that workers took on a year or more ago,” Luther said. “Until these workers can renegotiate their wages, you will continue to see the goods and services they can afford with their wages diminish.”
In the meantime, there are steps consumers can take when re-examining their personal budget in some key areas:
Northbound Mortgage Rates
Homebuyers in the nation’s hottest real estate markets know that soaring home prices aren’t reversing any time soon. According to real estate agent.com.
But now mortgage rates are rising – towards the thin air of 5%.
“The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell from 4.5% to 4.8%,” the Mortgage reported. Bankers Association in Washington, DC, last week. (A conforming loan is also known as a conventional mortgage that meets the buy-and-sell standards by the government-sponsored companies Fannie Mae and Freddie Mac.)
“There really isn’t much you can do,” said Jeff Ostrowski, real estate analyst for Bankrate. “Shop as hard as you can for your mortgage and make sure the home you buy is realistically within your budget.”
At the end of last week, the MBA reported that mortgage applications were down 6.8% from the previous week.
“Mortgage rates hit their highest level in more than three years last week as investors continue to price in the impact of tighter monetary policy from the Federal Reserve,” Mike said. Fratantoni, the association’s chief economist, in a press release.
“Unsurprisingly, the volume of refinance applications has fallen further as fewer borrowers are incentivized to apply at significantly higher rates than a year ago,” he said. “The volume of refinancing applications is now 60% below last year’s levels, in line with MBA’s forecast for 2022.”
With home and auto insurance becoming more expensive, consumers might try to put all their eggs in one corporate basket, says Bankrate analyst Sarah Foster.
“There are many ways for consumers to reduce their expenses, especially when it comes to auto insurance,” she said. “One of the most important steps to take, and one that ultimately saves you the most money, is to bundle your insurance.”
On Monday, Bankrate released its annual report on the true cost of car insurance showing that nationally, drivers spend an average of $1,771 a year on car insurance, or 2.57% of average household income. .
Drivers in South Florida, according to the report, spend an average of $3,508 or 5.58% of their annual earnings.
One move to avoid, the report suggests: adding a teenage driver to a policy, which “may be the costliest life event for auto insurance consumers, resulting in a $2,081 increase in the average premium of ‘car insurance “.
Only one thing to do: find low mileage discounts.
“Obviously people are working remotely more frequently than they were a few years ago,” Foster said, pointing to the reduction in miles traveled by workers during the COVID-19 pandemic to and from the office. “It’s important to look at other life events and discounts.”
And the most common advice, she said, is to simply shop around for landlords, renters and auto insurance to get the most savings.
Plan a trip? Book well in advance
As fuel prices rise due to continued inflation and the Russian invasion of Ukraine, some airlines have made it clear that higher fares are in sight.
The main countermeasure is to book tickets well in advance, says David Slotnick, senior airlines editor for The Points Guy, a travel lifestyle site.
“Flight prices are going up,” he said. “It is difficult to link air fares to inflation because they are so variable in nature. Demand is skyrocketing and supply is relatively fixed. There are only a limited number of flights an airline can offer.
Slotnick said airlines such as Delta Airlines and United Airlines have both forecast higher ticket prices due to rising jet fuel costs. “In mid-March, Delta said it would expect to charge an additional $15-20 per ticket per ride.”
“If you’re a consumer planning (flying) later this year and want to save money, book as soon as possible,” he said. “It takes weeks or months for jet fuel prices to trickle down to air fares.”
Booking tickets mid-week or during other off-peak travel times, such as well before or after the holidays, usually results in cheaper fares.
“That was true before inflation and it remains true today,” Slotnick said.