The Chicago Journal

Prices of 2022: the highs and lows

Edward Anderson Edward Anderson on February 13, 2023

Image source: Sky News

Prices: The United States experienced its highest level of inflation last year.

The Federal Reserve has been battling inflation throughout 2022 and has used all available options, including hiking interest rates.

Price hikes

Recent data on inflation from the Bureau of Labor Statistics show a decline in price rises to 7.1%.

Retail prices increased 7.6% (inflation unadjusted) between November 1 and December 24, making it impossible for customers to purchase gifts without going over budget.

The information was provided by the Mastercard Spending Pulse, which looks at retail purchases beyond auto sales.

The cost of holiday meals skyrocketed throughout 2022 as food prices increased faster than inflation.

Some products had remarkable double-digit growth, but others experienced no change or a drop.

Electronics

As soon as the demand for expensive electronics fell, retailers noticed a change in consumer behavior.

Prices for major electronics decreased throughout the year that ended in November.

  • Smartphones plunged 23.4%
  • TV prices dropped 17%
  • Computers rolled back prices by 4.4%
  • Major appliances fell by 1%

Several businesses, like Best Buy and Walmart, stocked up at the beginning of 2022 in preparation for supply chain problems and anticipated rises in consumer demand.

Their plans, however, were derailed by mounting prices and declining client confidence.

In addition, during the early stages of the epidemic, when people were confined, they made significant purchases or upgrades.

Read also: Real estate market hopes for consistency this year

Apparel & toys

Although slowly, apparel prices rose last year.

  • Clothing prices rose by 3.6%
  • Footwear increased by 2.3%
  • Sporting goods climbed 2.7%
  • Toys had a meager 0.6% increase

The items were a bargain despite the slight price increase because inflation surpassed it.

In December, Walmart CEO Doug McMillon made the following remarks:

“In toys, sporting goods, categories like that, prices have come down more aggressively.”

“We’re still inflated, but we’re not inflated nearly as much as we are in the other categories.”

However, because retailers overestimated client demand, there was a stockpile of extra goods.

Stores made offers to move inventory, enticing customers to make purchases.

Retailers were able to control prices as a result.

Plane tickets

The 2020 pandemic prompted air travel demand to decline, dropping to an all-time low.

However, it was revived last year.

However, the cost of travel increased by 36% yearly.

Glen Hauenstein, the president of Delta, described the increase as “unprecedented” in March.

“I have never seen… demand turn on so quickly as it has over Omicron,” said Hauenstein.

Airlines made a record amount of money in April, May, and June due to high airfares and congested flights.

Two years after the pandemic-induced lockdowns, they made a full-force comeback owing to travelers.

Gas prices

The cost of land travel increased.

The price of gasoline increased by 10.1%; however, it has since fallen from its record highs.

Gas price volatility was caused by the Russian invasion of Ukraine and geopolitical plans that depended on the availability of oil.

GasBuddy predicts the chances of the national average returning to the $4 per gallon price level could occur as early as May.

The fuel price tracking app GasBuddy does not anticipate another year of extreme volatility.

Read also: Minimum wage to go from $7 to $15 this year

Food prices

Food prices increased by 10.6% in 2022, which is more than overall inflation.

Numerous factors contributed to price increases for particular supermarket items through November 2022.

Egg prices rose by 49.1% as a result of the terrible avian influenza, a lack of supplies, and excessive demand.

Margarine prices increased by 47.4% due to the Russian invasion of Ukraine.

In addition, butter prices increased by 27% as the world’s milk supply plummeted.

Flour is an additional casualty of the Ukrainian situation.

The price of flour increased by 24.9% as a result of the disruption of the global grain market and high US transportation expenses.

In California, lettuce prices jumped by 19.8% as a result of crop disease.

Food prices increased by 12% over that period.

As the cost of eating out increased in 2022, many customers chose to accept higher prices as an alternative.

The price of dining out increased by 8.5% last year as restaurants raised menu prices to offset their rising material expenses.

Reference:

What got really expensive this year, and what got cheaper

How far will housing prices drop at its current pace?

Claire Peterson Claire Peterson on October 27, 2022

Image source: Getty Images

The US housing market has seen a series of ups and downs throughout the year, with prices moving unpredictably.

The market saw a comfortable rise in prices two years ago.

Since then, house prices have peaked but are now slowing down.

Lower housing prices

Potential buyers and owners are wary of the market movement and wonder how far prices will fall.

Many experts believe it will continue to decline, but they believe it will not fall as low as it has in recent years.

The S&P CoreLogic Case-Shiller indices are a tool that measures home prices in the United States.

It reports that national house prices fell 27% from the 2006 peak to the 2012 trough.

Jeff Tucker, Senior Economist at Zillow, explains:

“It was different in 2008, 2009 because that drop in prices was because of a push from sellers.”

“Because of foreclosures and short sales, there were a lot of extremely motivated sellers who were willing to take a loss on their homes.”

Read also: Housing prices set for another hit as mortgage rates surge to 7%

Inventory and mortgage rates

Tucker also highlights that the real estate crash happened when the inventory of homes for sale was four times higher.

Inventory is currently below pre-pandemic levels, increasing housing competition.

The competition also keeps prices high.

Mortgage rates have more than doubled since the start of this year.

The doubled mortgage rate has dramatically changed the calculations for homebuyers.

Black Knight is a mortgage company that found an interesting report.

There is a 73% increase as monthly repayments on mid-priced home equity and interest-rate mortgages increased by $930 from last year.

How low will housing prices drop?

Black Knight reports that buying a home today is more expensive compared to previous decades due to factors like:

  • Increasing mortgage rates
  • Elevated home prices
  • The slow-moving wage increase

While the factors seem intimidating, buyers are in store for some relief.

Goldman Sachs economists expect home prices to drop about 5-10% from their June peak.

Wells Fargo recently predicted that the national average price of single-family homes will drop 5.5% year-on-year by the end of 2023.

Economists expect the average house price to drop to $364,000, down 5.5% from this year.

They also predict that house prices will recover but later rise in 2024.

Prices will rise 3.3% to 376,000 by the end of 2024.

Wells Fargo researchers wrote a statement saying:

“The primary driver behind the housing market correction thus far has been sharply higher mortgage rates.”

“If our forecast for Fed rate cuts is realized, mortgage rates are likely to fall slightly just as cooling inflation pressures boost real income growth.”

“A modest improvement in sales activity should then follow, which will reignite home price appreciation heading into 2024.”

Read also: September witnesses new home building retreat as mortgage rates intimidate buyers

The influence of location

Depending on the location, house prices will likely go down.

According to Jeff Tucker, the slowdown will be regional from the pandemic price run-ups.

At the time, real estate prices were rising in markets across the country.

The declines will be most evident where profits will be highest during the pandemic.

Tucker was referring to the West and the Sun Belt, which includes cities like Austin, Boise and Phoenix.

“Nationally, we might see a 5% decline from the peak,” he explained.

“But prices will decline by more in the West, and there will be a smaller decline in the Southeast.”

According to Zillow, house prices have fallen from month to month in pandemic hotspots, including:

  • Austin, down nearly 1%
  • Las Vegas, down 1.9%
  • Phoenix, down 2.3%

Prices in Boise, Idaho, rose nearly 60% during the onset of the pandemic but are already seeing a yearly decline.

According to Zillow, prices fell 3.9% year-on-year in September.

“A number of metro areas, especially in the West, will see some year-over-year price declines this spring,” said Tucker.

“That will be the worst comparison time because that’s when many markets reached their peak.”

References:

Home prices are finally falling. But how low will they go?