High Inflation, squeezes Americans pocket books

Americans pushed their limits when purchasing a new home. Many new homes have been secured with purchase agreements, and the builders have not broken ground yet. Thousands of homes are only half completed do to supply shortages and most may not be move in ready and closed until the fall.

It’s possible that some high-earners overspent on their homes based on standard benchmarks: For example, a $1.7 million home with a 20% down payment would cost $100,000 per year in mortgage payments. According to Bloomberg, that would account for 40% of a pre-tax income of $250,000 or more. Most financial experts recommend limiting home costs to 30% of income. However with the closing of their new build hanging in the air of uncertainty, will these buyers be patient and close on their dream home? Lot’s of questions that not even the best data resources can answer.

A 40-year high in inflation is prompting many Americans to reassess their financial goals. Food, housing, fuel, and other basic necessities are all seeing increases in price due to the current rate of inflation, which stands at 8.3 percent.

According to a new BMO Harris Bank research, 25 percent of Americans are postponing retirement because of inflation. One in three people who earn $250,000 a year say they’re living paycheck to paycheck, according to a survey from Pymnts.com and LendingClub.

It’s becoming increasingly common for people to use their savings accounts as inflation rises, according to a BMO Harris Bank survey. The survey indicated that 36% of Americans have already lost money due to inflation.

As of this month, the National Association of REALTORS annual ®’s survey found that the average American consumer is spending $500 more per month on living expenditures than they did a year ago.

In a research by BMO Harris, consumers reaching retirement age said they are limiting their dining out, shopping, and driving habits because of rising costs. One asset management business, Schroders, found that only 22% of Americans believe they have enough money saved for a decent retirement, down from 26% a year earlier. Among the poll participants, more than half predicted that they will have less than $500,000 in savings when they retire. Most respondents, however, settled on a median goal of $1.1 million for their retirement savings.

As BMO Harris Bank’s head of customer strategy Paul Dilda explains: “Consumers must think differently about their finances in an inflationary environment.” BMO Harris Bank is a Chicago-based institution with locations throughout the Midwest and West Coast.

Dilda asserts that inflation is having a particularly negative impact on the nation’s younger citizens.
As a result, significant purchases like a home and a car may strain their budgets even more, he says.

Source: BMO Real Financial Progress Index, National Association of Realtors, FORTUNE June 1st 2022, Personal Finance-Retirement, Motley Fool, “More Than a Third of 250K Earners Live Paycheck-to-Paycheck. By daily Upside June 1 2022 at 9:00PM