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Goldman Sachs Chief Predicts Inflation Could Be More Persistent Than Anticipated

Goldman Sachs CEO David Solomon has warned that inflation might be more persistent than anticipated, following recent reports indicating a resurgence in price pressures within the U.S. economy. In his annual letter to shareholders, Solomon expressed optimism for the year ahead, highlighting potential benefits from a rebound in capital markets activity, despite the possibility of sustained high prices. He noted the U.S. economy's resilience despite rapid tightening of economic conditions and the absence of a recession, suggesting that inflation may remain higher than many expect.

Inflation, driven by pandemic-related supply chain disruptions, a tight labor market, and increased consumer demand, has significantly impacted U.S. households, particularly low-income families. Although inflation has decreased from its peak in June 2022, it remains above the Federal Reserve's 2% target. The consumer price index has been hovering at or above 3% for the past nine months, raising concerns about stagflation—a combination of economic stagnation and high inflation.

Solomon also mentioned that multinational corporation CEOs have observed deteriorating economic conditions for lower-income consumers, leading to behavioral changes. He noted that the Federal Reserve now has more flexibility to ease monetary policy if economic conditions worsen. Lastly, Solomon referred to 2023 as a "year of execution" for Goldman Sachs, which began with significant job cuts as part of a strategy refocus, aiming to strengthen the firm's core businesses and position it for future success. Read More.

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Surge in Home Foreclosures Across the Country, with These 5 States Experiencing the Sharpest Increase

Home foreclosures increased again in February as Americans continue to struggle with the ongoing cost-of-living crisis. A report by ATTOM, a real estate data provider, revealed that there were 32,938 properties with foreclosure filings, including default notices, scheduled auctions, and bank repossessions. This represents an 8% increase from the previous year, although it is a 1% decrease from the previous month.

ATTOM CEO Rob Barber noted that the annual increase in foreclosure activity indicates changes in the housing market, suggesting that homeowners may need to adjust their market strategies and lending practices due to evolving financial landscapes.

Despite the overall increase, foreclosure completions decreased in 28 states in February. Lenders repossessed 3,397 properties, a 14% decrease from the previous month and an 11% decrease from the previous year. The largest declines were in Georgia (52%) and New York (41%).

However, foreclosures surged in other states, with South Carolina experiencing a 51% increase, Missouri a 50% increase, and Pennsylvania a 46% increase. Texas saw a 7% rise in foreclosures, while Indiana had a 0.8% increase.

Although foreclosure rates are rising, they remain well below the levels seen during the 2008 financial crisis. However, the situation could worsen due to high home prices, mortgage rates, and property taxes affecting affordability.

Housing affordability is at its worst in decades, with the typical salary required for homeownership nationwide rising to $106,500, a 61% increase from $59,000 four years ago, according to Zillow. The affordability crisis is attributed to several factors, including the Federal Reserve's aggressive interest rate hikes, which sent mortgage rates soaring above 8% for the first time in nearly two decades last year. Rates have been slow to retreat, hovering near 7% as inflation data dampened hopes for immediate rate cuts.

The average rate for a 30-year fixed loan rose to 6.74% this week, according to Freddie Mac, significantly higher than the pandemic-era lows of 3%. Despite nearly doubling mortgage rates from three years ago, home prices have hardly budged, largely due to a lack of available homes for sale. Sellers who secured low mortgage rates before the pandemic have been reluctant to sell, resulting in limited options for potential buyers. Read More.