Personal Finance

Inflation, home insurance, other monthly payments are skyrocketing

Published

8 months ago

August 2, 2024

Record inflation may have people questioning whether homeownership is still a good investment.

Home prices have been rising faster than incomes, which can be a problem for homeowners because as the value of a home rises, so does the cost to maintain it.

More than 1 in 4 homeowners with mortgages are considered “cost-burdened,” meaning they spend more than 30% of their income on housing costs, according to a 2023 analysis of U.S. Census data by the Chamber of Commerce.

“Unfortunately, a lot of people go into buying a home and they don’t understand that their monthly payment could change,” said Devon Viehman, regional vice president for the National Association of Realtors.

Changes in two expenses in particular tend to surprise people, experts say.

“What many [homeowners] have failed to anticipate is the rise in both property taxes — and that’s correlated to the rise in the value of their home, something that at some level helps them — as well as the increased cost of paying for that insurance,” said Mark Hamrick, senior economic analyst at Bankrate.

‘Paper’ wealth and rising expenses

Single-family homeowners accumulate an average of $225,000 in wealth from their homes during a 10-year period, according to a 2022 report from the National Association of Realtors.

“That wealth sort of boils down to being primarily only on paper, and the time that you cash in that asset is when you sell the home,” said Hamrick.

Property taxes are one of the costs that can increase with the value of the home. Homeowners whose properties were reassessed between 2019 and 2023 amid skyrocketing valuations saw a median tax increase of 25%, according to a February 2024 study by CoreLogic. The annual median taxes for properties in the U.S. that were reassessed increased more than $600 over that period.

Home insurance is the other major expense that can fluctuate after a home purchase.

There has also been a 20% increase in average home insurance premiums between 2021 and 2023, according to insurance comparison company Insurify. Insurify estimates rates will rise another 6% by the end of 2024.

Florida, Louisiana, Texas and Colorado have seen the biggest spike in insurance rates over that period, influenced by extreme weather events.

Florida is leading the pack. The average annual rate for home insurance in Florida was nearly $11,000 in 2023, which is more than $8,600 than the U.S. average. The state’s cities make up six of the top 10 most expensive cities to insure in the country, Insurify found.

What’s more, the cost of repairing a home has risen, which also affects insurance premiums.

“This is going to be a space to watch for the foreseeable future, simply because it is such a dynamic and volatile and potentially costly environment,” Hamrick said.

Tips for homebuyers

Viehman of the NAR recommends people shopping for a home “lean on their realtor first.” She recommends homebuyers ask their real estate agent for a history of costs associated with owning the home such as property taxes, insurance, trash removal, water, gas and electrical bills.

Homebuyers should also see if the state they’re looking to buy in has any laws restricting property tax increases per year.

Just because you qualify for $3,000 a month in a mortgage payment doesn’t mean you should max it out right now … Go a little lower than that so that you give yourself that room.

Devon Viehman

regional vice president for the National Association of Realtors

A good agent ought to be able to answer all those questions for you, Viehman said.

Viehman also recommends leaving room in your monthly budget to address the possibility of surprise expenses.

“Just because you qualify for $3,000 a month in a mortgage payment doesn’t mean you should max it out right now,” she said. “Look for something where you can get in around $2,500 if $3,000 is your comfortable budget. Go a little lower than that so that you give yourself that room.”

Tips for current homeowners

Homeowners can also consider switching insurance companies if their rates get too high.

“You should be interviewing insurance companies,” Viehman said. “Interview everyone. Interview a few lenders. Interview a few realtors. Interview a few insurance agents because they all have different things that they offer, and you need to find what works best for you.”

Watch the video above to learn more about why home payments are skyrocketing and what homebuyers can do to help navigate in this challenging market.

Personal Finance

Amid tariff sell-off, avoid ‘dangerous’ investment instincts, experts say

Published

24 minutes ago

April 4, 2025

Business Finance News

Jamie Grill | Getty Images

As U.S. markets continue to suffer steep declines in the wake of the Trump administration’s new tariff policies, you may be wondering what the next best move is when it comes to your retirement portfolio and other investments.

Behavioral finance experts warn now is the worst time to make any drastic moves.

“It is dangerous for you — unless you can read what is going to happen next in the political world, in the economic world — to make a decision,” said Meir Statman, a professor of finance at Santa Clara University.

“It is more likely to be driven by emotion and, in this case, emotion that is going to act against you rather than for you,” said Statman, who is author of the book, “A Wealth of Well-Being: A Holistic Approach to Behavioral Finance.”

That may sound easier said than done when headlines show stocks are sliding into bear market territory while J.P. Morgan is raising the chances of a recession this year to 60% from 40%.

“When the market drops, we have sort of a herd instinct,” said Bradley Klontz, a psychologist, certified financial planner and managing principal of YMW Advisors in Boulder, Colorado. Klontz is also a member of the CNBC FA Council.

That survival instinct to run towards safety and away from danger dates back to humans’ hunter gatherer days, Klontz said. Back then, following those cues was necessary for survival.

But when it comes to investing, those impulses can backfire, he said.

“It’s an internal panic, and we’re just sort of wired to sell at the absolute worst times,” Klontz said.

‘Never trust your instincts when it comes to investing’

When conditions are stressful, our frame of reference narrows to today, tomorrow and what’s going to happen, Klontz said.

It may be tempting to come up with a story for why taking action now makes sense, Klontz said.

“Never trust your instincts when it comes to investing,” said Klontz, particularly when you’re excited or scared.

Why investors should hold despite market sell-off

Meanwhile, many investors are likely in a fight or flight response mode now, said Danielle Labotka, behavioral scientist at Morningstar.

“The problem with that, in acting right away, is that we’re going to be relying on what we call fast thinking,” Labotka said.

Instead, investors would be wise to slow down, she said.

Just as grief requires moving through emotional stages in order to eventually feel good, it’s impossible to jump to a good investing decision, Labotka said.

Good investment decisions take time, she said.

What should be guiding your decisions now

Many investors have experienced market drops before, whether it be during the Covid pandemic, the financial crisis of 2008 or the dot-com bust.

Even though we’ve experienced volatility before, it feels different every time, Labotka said.

That can make it difficult to heed to the advice to stay the course, she said.

Investors would be wise to ask themselves whether their reasons for investing and the goals they’re trying to achieve have changed, experts say.

“Even though the markets have changed, why you’re invested, your values and your goals probably haven’t,” Labotka said. “These are the things that should be guiding your investments.”

While there is the notion that life well-being is based on financial well-being, it helps to take a broader view, Statman said.

At any moment, no one has everything perfect when it comes to their finances, family and health. In life, as in an investment portfolio, all stocks don’t necessarily go up, and it’s helpful to learn to live with the good and the bad, he said.

“Things are never perfect for anyone,” Statman said.

Personal Finance

20 items and goods most exposed to price shocks

Published

56 minutes ago

April 4, 2025

Business Finance News

Employees at a clothing factory in Vo Cuong, Bac Ninh province, in Vietnam.

SeongJoon Cho/Bloomberg via Getty Images

The Trump administration’s plan to slap steep tariffs on goods from dozens of countries is expected to spike prices for consumers. Some items, like leather goods, will see a bigger jump than others.

The overall impact on households will vary based on their purchasing habits. But most families — especially lower earners — are likely to feel the pain to some degree, economists said.

According to an analysis by the Budget Lab at Yale University, the average household will lose $3,800 of purchasing power per year as a result of all President Donald Trump‘s tariff policies — and retaliatory trade actions by other nations — announced as of Wednesday.

That’s a “meaningful amount,” said Ernie Tedeschi, the lab’s director of economics and former chief economist at the White House Council of Economic Advisers during the Biden administration.

The analysis doesn’t include the 34% retaliatory tariff China announced Friday on all U.S. exports, set to take effect April 10. The U.S. exported nearly $144 billion worth of goods to China in 2024, the third-largest market for U.S. goods behind Canada and Mexico, according to the Census Bureau.

Clothing prices poised to spike

The garment industry is among the most susceptible to tariff-related price shocks.

Prices for clothing and shoes, gloves and handbags, and wool and silk products will all increase by between 10% and 20% due to the tariffs Trump has so far imposed, according to the Yale Budget Lab analysis. Tedeschi noted that some of these price increases could take 5 years or more to unfold.

Srdjanpav | E+ | Getty Images

The bulk of apparel and shoes sold in the U.S. is manufactured in China, Vietnam, Sri Lanka and Bangladesh, said Denise Green, an associate professor at Cornell University and director of the Cornell Fashion + Textile Collection.

Under the “reciprocal tariffs” Trump announced Wednesday, Chinese imports will face a 34% duty. Goods from Vietnam, Sri Lanka and Bangladesh face tariffs of 46%, 44% and 37%, respectively.

Taking into account the pre-existing tariffs on China totaling 20%, Beijing now faces an effective tariff rate of at least 54%.

“The tariffs are disastrous for the apparel industry worldwide, but especially for smaller countries with highly specialized garment manufacturing,” Green said.

A lot of clothing production has moved overseas over the last 50 years, Tedeschi said, but it’s “very unlikely” clothing and textile manufacturing will return to the U.S. from Asia in the wake of the new tariffs.

“People will still import clothing to a large extent, and they’ll have to eat the price increase,” he said.

Car prices are another pain point

Various Mercedes-Benz vehicles assembled in the “Factory 56” production hall.

Picture Alliance | Picture Alliance | Getty Images

The duties announced Wednesday are on top of other tariffs Trump has imposed since his second inauguration, including duties on automobiles and car parts; copper, steel and aluminum; and certain imports from Canada and Mexico.

The cost of motor vehicles and car parts could swell by over 8% according to the Yale Budget Lab analysis.

Bank of America estimated that new vehicle prices could increase as much as $10,000 if automakers pass the full impact of tariffs on to consumers.

“Rising car prices are already a major pain point for the vast majority of Americans who live in an area where they need a car to get to work, school, their kids’ activities, and medical appointments,” said Erin Witte, director of consumer protection for the Consumer Federation of America.

“These tariffs will make it much worse, and will significantly reduce Americans’ choices about what car they want to buy,” she said.

Tariffs on specific commodities like aluminum and steel affect consumers indirectly, since the materials are used to manufacture a swath of consumer goods.

White House spokesman Kush Desai pushed back on analyses that prices will spike because of Trump’s tariff policy.

“Chicken Little ‘expert’ predictions didn’t quite pan out during President Trump’s first term, and they’re not going to pan out during his second term when President Trump again restores American Greatness from Main Street to Wall Street,” Desai said in an e-mailed statement.

Trump’s second-term tariffs are orders of magnitude larger than his first term, however.

The first Trump administration put tariffs on about $380 billion worth of goods in 2018 and 2019, according to the Tax Foundation. The tariffs so far imposed in Trump’s second term affect more than $2.5 trillion of U.S. imports, it said.

There’s also evidence that the first-term tariffs raised prices for some consumers.

Retail prices for the typical washing machine and clothing dryer rose by about 12% each — about $86 and $92 per unit, respectively — due to 2018 tariffs on imports of washing machines, according to a study by economists at the Federal Reserve Board and University of Chicago. The increased cost to consumers totaled $1.5 billion a year, the study found.

Tariffs are expected to raise the U.S. inflation rate

Economists also expect the overall U.S. inflation rate to jump due to tariffs.

American businesses that import goods from abroad will be the ones on the hook for paying the cost of tariffs, and economists anticipate that companies will pass at least some of those costs on to consumers.

The tariffs are disastrous for the apparel industry worldwide, but especially for smaller countries with highly specialized garment manufacturing.

Denise Green

director of the Cornell Fashion + Textile Collection

An environment of rising prices for foreign goods may give U.S. businesses cover to somewhat raise their prices, too.

As a result, the consumer price index could jump to 4.5% later in 2025, Capital Economics estimated Thursday. That’s up from 2.8% in February, and roughly double the Federal Reserve’s long-term inflation target.

Personal Finance

What to know before trying to ‘buy the dip’ amid tariff sell-off

Published

1 hour ago

April 4, 2025

Business Finance News

Anchiy | E+ | Getty Images

As the stock market continues to fall, some investors are eager to “buy the dip,” or purchase assets at temporarily lower prices. Financial advisors, however, urge clients to stick with long-term investing plans amid the latest volatility.

U.S. stocks plunged on Thursday after President Donald Trump issued sweeping tariffs on more than 180 countries and territories. The sell-off continued Friday after China unveiled plans to impose a 34% retaliatory tariff on all goods imported from the U.S.

As of Friday afternoon, the Dow Jones Industrial Average was down more than 1,700 points following a 1,679.39 drop on Thursday. Meanwhile, the S&P 500 was off 4.8% after losing 4.84% the previous day. The tech-heavy Nasdaq Composite slid by 4.9% after plummeting 5.97% on Thursday.

If you’re looking for buying opportunities while assets are down, here are some things to consider, according to financial advisors.

Timing the market is ‘impossible’

When asset values fall, there’s often chatter in online communities like Reddit about whether to “buy the dip.” Typically, investors aim to buy at a discount and expect an eventual recovery, which could lead to future gains.

While buying cheaper investments isn’t a bad idea, the strategy can be tricky to execute since, of course, no one can predict stock market moves, experts say.

“We never recommend timing the market, mostly because it is impossible to do without simply getting lucky,” said certified financial planner Eric Roberge, CEO of Beyond Your Hammock in Boston.

Instead, you should “stick to a thoughtful, rules-based investment strategy designed to get you through to your long-term goals,” he said.

Keep a ‘disciplined approach’

When buying assets during a market downturn, you need a “disciplined approach,” according to CFP Jay Spector, co-chief executive officer of EverVest Financial in Scottsdale, Arizona.

For example, some investors linger in cash while waiting for rock-bottom prices. But no one can predict the bottom of the market, experts say.

Waiting on the sidelines can be costly because the best returns can follow the biggest dips, according to research from Bank of America.

Rather than trying to time the bottom, you should consider “dollar-cost averaging,” which systematically invests your money at set intervals, Spector said. The strategy can capture lower prices while reducing risk, he said.