NerdWallet's Smart Money Podcast - Money News: Where to Save Money on Falling Prices from Deflation

Episode Date: November 22, 2023

Learn which prices are slowing down—or even dropping—as a result of deflation, including your Thanksgiving feast. Before focusing on price deflation, hosts Sean Pyles and Anna Helhoski explore recent financial updates, including the rising income among first-time homebuyers, the United Autoworkers Union (UAW) ratifying new contracts with the Big Three automakers, and Black Friday and Cyber Monday sales trends. Then, Sean and Anna explain what’s happening behind recent price deflation. They highlight significant price drops across various goods and services, including eggs, smartphones, health insurance, gas, and Thanksgiving dinner essentials. They also break down the significance of these price reductions amid ongoing inflationary pressures, potentially offering a glimpse of relief for consumers in specific sectors. In their conversation, the Nerds discuss: homebuyer demographics, rising incomes, housing market shifts, UAW contracts, Black Friday sales, Cyber Monday sales, philanthropic gestures, deflation insights, price drop analysis, consumer trends, Thanksgiving food prices, holiday deals, charitable legacies, inflation impact, and deflation. If you’re looking for an app to track all your money in one place, then check out the free NerdWallet app: https://nerdwallet.com/app  To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Helhosky. And this is our weekly personal finance news roundup, where we take a look at recent developments in the world of money, and then go in-depth on an issue that's important to your life and your bottom line. Today, we're going to break down what's happening with inflation, or more accurately, deflation, in a very practical way. We know that prices are not rising as fast as they were, and in fact, some prices are going down. Right, but which prices? We dove into that question and we'll have a look at what's

getting cheaper. We'll also have a rundown of what Thanksgiving dinner is costing this year. Gobble, gobble. I can't wait for sweet potatoes and that gelatinous can of cranberry. It's all about the mashed potatoes for me. But before that, a feast of money headlines from the last few days. So Sean, the National Association of Realtors released its annual profile of home buyers and sellers. And it's got some interesting factoids about who's been out there in the housing market over the last year. You mean who's been braving 6, 7, 8% mortgage interest rates? Exactly. And the NAR's economists highlighted a few that really tell a story of how

much the housing market is changing. First, the average income among first-time homebuyers rose by $25,000, from $71,000 to $95,900. Now, obviously, that figure can vary wildly depending on where you live. But to see that kind of jump for the average buyer is just, well, if I was looking for my first house, I would find that very discouraging. Depressing, even. And this is something we talked about on the show a couple weeks ago, but that rise in the income required to buy a home goes along with a jump in what you need for a down payment, which is the highest in 20 years. All of this is happening as a consequence of rising interest rates and rising home prices. But Ana, despite all that seemingly bad news, the number of first-time homebuyers rose this year to 32%

of all homebuyers. That's up from 26% last year, which was the lowest since NAR started the survey in 1981. And here's something that will surprise exactly nobody in the younger millennial older Gen Z cohort. The median age of all homebuyers, both first-time and repeat buyers, has pushed up over the last two decades. It's now 49 years old instead of 39. The median age for first-timers is now 35, and for repeat buyers, it's 58. That makes sense because if you need more money to buy a home, it's likely you're going to need to be older. Right, meaning the fulfillment of the American dream of homeownership just gets delayed too. And Sean, an update on a story we've been covering. Members of the United Auto Workers Union have ratified new contracts with the big three automakers, Ford, GM, and Stellantis.

Yeah, they'll be getting an immediate 11% pay boost, rising to at least 25 percent over the next four and a half years. They're also getting a bigger contribution to their 401ks, 10 percent of their pay, plus more paid time off. And this comes after a six and a half week strike that started on September 15th. Meantime, the Wall Street Journal is reporting that employees at two branches of Wells Fargo Bank have notified the National Labor Relations Board that they plan to hold votes on whether to unionize. It's very unusual in the finance sector where only 1.3% of that industry is unionized. So, Anna, I don't know if you've heard about this, but apparently there are some big time sales happening at stores on Friday, the day after Thanksgiving. Sounds vaguely familiar.

And then it happens again online on Monday. Yep, heard about that too. All right, Sean, how's your estate planning going? Well, I've got my will, my durable power of attorney and beneficiaries all sorted out. Why do you ask? Well, here's an idea. Leave all your money to an organization that helps pay off people's medical debt. Oh, I saw this story. Amazing, heartbreaking, and heartwarming. A woman, Casey McIntyre, a book publisher who lived in New York City, tragically died from ovarian cancer earlier this month at the age of 38.

Absolutely awful. Yeah, leaving behind a husband and young daughter. But what she did when confronted with her mortality is nothing short of heroic. She directed any money donated in her memory to go to a campaign page she put up with a nonprofit called RIP Medical Debt. The organization takes donations and uses them to buy up medical debt from collections agencies for pennies on the dollar. It then pays off that debt. As of earlier this week, donations made in Casey's name vaulted over the half million dollar mark. RIP Medical Debt says that every hundred dollars donated helps eliminate $10,000

of debt. So half a million dollars and counting could eliminate more than $50 million worth of outstanding medical debt. That's a hell of a path to immortality, helping millions of people take that albatross from around their necks. Yes, quite the philanthropic legacy, effective and creative. Well, that's what we saw and heard about over the past week in Money News. Let us know what we missed and send us the headlines you've seen and want to hear more about. And now, on to our in-depth look at where American consumers are seeing prices drop.

You know what I'm thankful for this year, Anna? What's that, Sean? Things are finally starting to get cheaper. Price deflation. That's right. Inflation peaked in June 2022 at 9.1%, but has slowed down, that is, it rose at a slower pace ever since. For listeners who tuned in last week, the latest Consumer Price Index report from the Labor Department showed the inflation rate was flat from September to October at 3.2%. And that's a big deal, Sean. It is, but what's an even bigger deal is the report showed deflated price indexes for 92 goods and service categories and subcategories. That's out of 338 they measure. That means we've seen not just slower price increases, but full-on price drops

for a lot of what we buy. And it's fantastic to see some price drops, but I want to acknowledge that most prices have not declined. And our listeners are still likely feeling the effects of inflation over the last couple of years when compared to pre-pandemic prices. With that said, we do have good news for consumers. What are we looking at first, Sean? Well, the incredible edible egg, aka my favorite breakfast food, is finally cheaper. Most people may not be aware, but there was an avian flu outbreak that began in early 2022, and it killed more than 60 million birds. That helped send prices for eggs and poultry soaring. Egg prices

in particular more than doubled from early 2022 to the peak in January 2023. But cases have been declining and prices have come down. From October of last year to October this year, the price of eggs fell around 22%. The average cost of a dozen gray day large eggs is now $2.07. Yeah, and some other goods prices that have come down include Black Friday staples like smartphones and TVs. Among services, the biggest price decline has been health insurance, down 34% in October 2023 from one year prior. Some other year-over-year drops include airfares, public transportation, and medical care services. Another major price decline, and this is a big win for consumers, is in fuel oil and gas. Gas prices peaked in June 2022 and since then have seen a roughly 33%

decline. Bear in mind that fuel, gas, and other energy prices are volatile, which is why they're not included in core inflation that the Federal Reserve values most when making interest rate decisions. And related, after peaking in January 2022, used cars and trucks are finally cheaper as well. In October, the price declined around 7% from last year. So Ana, that means that going over the hill and through the woods to grandmother's house should be less expensive for Thanksgiving this week. Yes, at least for getting to Thanksgiving. But what about what's on the table? Shall we take a look at that? Definitely. Let's make everybody hungry. But one thing to keep in mind as we talk about food prices is that food in general is one of the categories with the most volatility. Like energy, food isn't included in core inflation. All right. Well, turkey is traditionally the star of the show,

and this year they're a lot cheaper than in recent years. That right. Well, turkey is traditionally the star of the show. And this year, they're a lot cheaper than in recent years. That avian flu we mentioned earlier also drove up the cost of turkey. But with the outbreak under control, prices have dropped. The American Farm Bureau Federation, AFBF, found that the average price of an 8 to 16 pound turkey was $1.27 a pound in August of this year, a 22% decline from August last year. On to the sides. Potatoes are down just over 3% from last year. If you're mashing those potatoes, the other key ingredients are also cheaper than they were last year. Milk is down and so is butter. And it's a good thing that butter is cheaper because if you want it on a roll, it'll cost you some dough.

Prices for bakery products like biscuits and bread are still going up. If you're making a side salad, lettuce and tomatoes are cheaper than they were last year. But if you want a dressing for that salad, that's going to cost more. Other fresh vegetables that you might have on your table have gotten cheaper, but the frozen versions are still rising. For all our pescatarian Thanksgiving celebrators out there who won't be indulging in turkey, there's good news because fresh fish and seafood is down about 3.5%. So, Anna, what food are you most looking forward to eating this Thanksgiving? My mom makes the best pie crust ever, so apple pie.

Well, you are in luck because apples have gotten cheaper. As of October, the price is down just shy of 4%. Mom will be thrilled. Indeed. Well, I am most looking forward to my partner's potatoes and my mushroom gravy. We touched on how potatoes are less expensive now, but the CPI sadly doesn't track the price of mushrooms. So if they're too expensive, I might just forage for them in the woods near my house. Okay, but please just don't poison yourself, Sean. I'll do my best. That's it for this week's money news. We always welcome your money questions and comments. Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. Or send us a voice memo at podcast at nerdwallet.com. And remember to follow, rate, and review us wherever you're getting this podcast.

Today's episode was produced by Tess Vigeland and edited by Rick Vanderkneife. Kevin Tidmarsh mixed our audio. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds and happy Thanksgiving.