American's Are Better Off
Despite inflation, Americans have more money in the bank than in 2019 and only slightly more credit card debt relative to income. However, they don't necessarily feel better off than they did before the pandemic, inflation, and rising interest rates.
- Still, there is a growing sense of optimism about the economy. According to the University of Michigan’s Surveys of Consumers, consumer confidence is up.
- The average 401(k) balance has also increased to $127,000 in the second quarter of this year, up from $104,000 two years ago, per Fidelity.
A closer look at what Americans have and owe reveals both reasons for optimism and concern.
More Money But Not For Everyone
Real median weekly earnings were about 3.5% higher in Q2 2024 compared to early 2019. From 2020 to 2022, the lowest 25% of earners saw the highest year-over-year pay growth, according to the Atlanta Fed.
- The average American carried $74 in cash in 2023, up from $60 in 2019, and they have more money in the bank. However, the pandemic-driven savings cushion has mostly been spent.
- Still, the median checking and savings balance rose to $3,091 in February 2024, a 14% increase from 2019.
Yet, balances for lower earners fell from pandemic highs more quickly, and the median saving rate has declined to 2.9% in July 2024, less than half of what it was in late 2019. This trend reflects confidence stemming from higher home prices, stock prices, and bond income, notes Torsten Slok of Apollo Global Management.
Credit Cards, Autos And Housing
Credit card debt has increased since the early pandemic years. The average balance for those who carry debt rose to $6,218 in early 2024, compared to $5,834 at the end of 2019. While debt relative to income is steady, higher interest rates (23% vs. 17%) have made carrying debt more costly.
- More than half of credit card users now carry a balance, a shift from the previous trend.
- Post-pandemic, Americans opened new credit cards at a rapid rate, pushing total balances to a record $1.14 trillion in Q2 2024.
- The cost of car ownership, including prices, loans, insurance, and repairs, has surged since 2019. The average annual loan rate for new cars reached 7.1% in August, up from 5.4% in 2019.
- Gas prices remain 20% higher than at the end of 2019 despite a drop from 2022 peaks. Rising expenses have led many drivers to keep their cars longer, with the average age of vehicles now at 12.6 years.
- Over the past five years, homeowners have seen increased wealth due to surging home prices, while renters have faced rising costs.
The median mortgage payment rose to $1,520 in early 2024, and buying a home has become less affordable, with payments on a median-priced home nearly doubling from 2019 to $3,010. Home insurance premiums also jumped to $1,765 from $1,164. However, a potential drop in mortgage rates could provide relief, allowing homeowners to refinance and opening opportunities for renters to buy.
Disclaimer
Please note that Benchmark does not produce investment advice in any form. Our articles are not research reports and are not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.
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Photo by Giorgio Trovato / Unsplash.
