Money Rehab with Nicole Lapin - Driverless Cars Are Here, And It's Just The Beginning.

Episode Date: August 23, 2023

Today Nicole unpacks the biggest headlines on Wall Street and how they affect your finances. Up today: the fate of driverless cars, how China's real estate problem is a global catastrophe in the making, and why US homebuyers should be cautiously optimistic. Want to start investing, but don't know where to begin? Go to moneyassistant.com and meet Magnifi, your AI money assistant, designed to help you make a plan for your financial goals. Want one-on-one money coaching from Nicole? Book a meeting with her here: intro.co/moneynewsnetwork 

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. All right, I owe you a little explanation. I was gone last week. I was out sick, but like sick, sick, go to the hospital sick. When I'm feeling 100%, which I'm not quite yet, and all of this is resolved, I'll give you the full story, of course, and share all of the lessons of navigating our glorious medical system. Lessons I unfortunately learned the hard way. But my medical drama was

just the tip of the iceberg. Southern California got hit with a tropical storm and an earthquake. While LA, where I am, was ultimately okay, there was a lot of uncertainty around how things would turn out. So it made for a really stressful week. But the news doesn't stop. So let's dig into our weekly news roundup. Let's start off with the cars of the future. No, sadly, not flying cars. The cars of the future are driverless taxis, apparently full of people hooking up and getting high, clogging the streets of San Francisco. I'll explain. Two weeks ago on August 10th, the city of San Francisco allowed two driverless car companies, Cruise and Waymo, to start operating. Waymo had been operating in Phoenix for some time, while Cruise has started testing vehicles in other cities like Houston and Miami. The rollout has been screwed up, though, by various

issues such as cars losing signal and shutting down traffic. But it seems that the era of driverless cars is quickly approaching. So what does that mean? Right now, nothing, unless you live in San Francisco. But at one point, that was the case with Uber and Lyft as well. And now most of us haven't been in a cab in years. Rideshare companies were disruptors in ways that were expected and unexpected. From cab drivers being forced out of business to secondary markets renting cars to Uber and Lyft drivers, rideshare companies created a massive economic impact just by changing the way people get home from the airport. Cruise and Waymo may have just as large a disruption,

but they signal an even larger one in the future. For now, driverless taxis are sort of a quirky, techie San Francisco thing, but driverless trucking, which is being developed as well, will have national implications up and down the supply chain. Ultimately, the future of driverless technology is a little cloudy, as is the timeline for its widespread adoption. It's not clear what the impact on personal vehicles will be, but this is a technology that is widely being developed. For example, Apple has been working on driverless cars since 2019. Driverless cars are one of those technologies, much like AI, that seem like they're straight out of a sci-fi movie, until they arrive and suddenly sixth graders are using it to write their book reports. It will be a technology that

will have massive economic impacts, with some people losing their jobs and few making a ton of cash. But for many of us, it just means that maybe one day you'll be sipping rosé in the back of a driverless cab, wearing uncomfortable heels and a sash that says bridesmaid, and you'll think, huh, I guess this is the future. Speaking of drinking, the last time mortgage rates were this high was 21 years ago, with the latest rates topping out at 7.6% for a 30-year fixed rate mortgage. The current housing market is a difficult one, with many owners reluctant to sell and swap out their nice low interest rate mortgage for one that's much higher today. This has created a cycle where fewer houses than normal are coming onto the market.

Limited supply results in home prices staying high despite interest rates going up. Usually they work like a seesaw. And those interest rates impact the total price of the home as well as the monthly payments. So in the first part of 2021, when the interest rate was 2.65% and the median home price was $309,000, monthly payments could beat $999. Today, with the average interest rate of 7.09% and the average home price that's climbed to $410,000, monthly payments can be $2,200. So it's rough out there. But the news isn't all grim. There have been some promising trends with more homes being built in an attempt to meet the demand. Obviously, that's not going to help you if you're looking to buy a home right this second.

For that, you'll need to look at strategies like buying points and keeping that mortgage as short as possible to save money. But if you're planning on buying a home in a few years, then those numbers should give you something to be optimistic about. And hey, new homes aren't the only area of growth. A recent report by Goldman Sachs estimates that there will be 200,000 to 250,000 new manufacturing jobs in the next two years. This is basically a 2% boost over current manufacturing levels and is the result of investments and incentives by the federal government in semiconductors and green technology. This comes at a time when the reshoring or returning factory jobs to the United States is happening at an amazing rate. Between 2021 and 2022, manufacturing jobs increased 56%.

2021 and 2022, manufacturing jobs increased 56%. This increase grew out of the pandemic and supply chain issues, but has stuck around and seems like it will be an enduring boost for the U.S. economy. While all of this is awesome news for the U.S. economy, it hasn't been so hot for the Chinese economy, which is really struggling right now. We're going to just skim the surface here and touch on the major points, but let's start with a baby bit of history. China is big and for many years rapidly expanded. We all generally know this, right? China hit the billion citizen mark in the mid 80s, which coincided with a period of massive economic expansion. During this time, millions of people went from living an extremely rural lifestyle to living in densely populated cities. This created one of the largest real estate booms in the world and created a culture where housing was seen as a way to build wealth and create a more secure future for yourself.

was to sell people apartments on spec, use their mortgages to create new projects to sell other people, and then borrow money from the government at low interest rates to make up the difference and get those houses built. In 2020, the Chinese government turned off that money tap in an attempt to prevent a housing market bubble. But without the ability to borrow money cheaply, many of these companies suddenly struggled. Over the last three years, 50 Chinese real estate development companies have defaulted or struggled to pay their bills. Okay, that sounds bad, right? And it is. These companies have stopped working on buildings that they're developing, meaning they've put a massive number of people out of work. Plus, many people who had invested their life savings expecting to

buy an apartment are suddenly left with half-finished, unlivable pieces of property instead of the home they were dreaming of. So people on both sides of the equation, the home builder and the construction worker, are suddenly in a financial pinch. This means they do all the things that people who are financially struggling do. They spend less, which creates more unemployment. They also look for help from local governments, but those are struggling too due to the dwindling tax base caused by all of those unfinished apartments. Remember how we talked about reshoring being great for the United States? It's not so hot for the struggling Chinese economy and is compounding a financially fraught situation. Things are so bad that the last

youth unemployment numbers, those are between ages 16 and 24, were at a staggering 21% unemployed. The numbers are so dire that the Chinese government has just decided to stop reporting the numbers as of this summer. To put those numbers into a little perspective, the U.S. youth unemployment rate is around 8%. So this is how the situation has been evolving. Recently, another major Chinese real estate developer, Country Garden, missed two major payments, creating concern that there's more pain ahead for the Chinese economy. So what does all of this mean for you? Well, as of today, not that much. But a study published in the Harvard Business Review found that the world owes China a massive, massive amount of money. The entire planet owes

China 6% of the world's GDP. The entire world has an economic tie with the Chinese economy. And this level of economic uncertainty could create a ripple effect and social unrest. So this story has the potential to have global ramifications and be even more disruptive than those driverless cars. For today's tip, you can take straight to the bank. If you're struggling in this real estate market, you can reach out to HUD, that's the Department of Housing and Urban Development, to find resources that could help stave off foreclosure, including the Making Home Affordable program, which can help renegotiate your loan and also lower your payments. Money Rehab is a production of Money News Network. I'm your host, Nicole

Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.