The Money Ladies' New Year's guide to the 2024 economy

Inflation is slowing, unemployment’s low and the Federal Reserve thinks we’ve probably avoided a recession.

Sounds like good news – but not for everyone.

"I don't think the economy is as good as it might appear," On Point listener Carol says.

Finance journalists Michelle Singletary and Rana Foroohar on what to watch for in our personal finances and national economy this year.

Today, On Point: The economy and our finances in the new year.

Rana Foroohar, CNN global analyst. Financial Times global business columnist and associate editor. Author of several books, including "Don't Be Evil," Makers and Takers" and "Homecoming." (@RanaForoohar)

Michelle Singletary, personal finance columnist for the Washington Post. Author of "The 21 Day Financial Fast." Her column "The Color of Money" is syndicated in newspapers across the country. (@SingletaryM)

Part I

Last month, one of our listeners left this message in the On Point voicemail box.

CAROL: Hi, I'd like to hear more about the economy. I think we need the Money Ladies more often. There are problems. We got inflation. People are maxed out on their credit cards. Elders have no savings.

And as they retire, they're going to be in poverty. And commercial real estate has a big problem, because people are working from home. I think things are not good in the economy for many individuals and as a whole. As I say, the Money Ladies, but I don't think the economy is as good as it might appear.

BECKER: That's Carol from Amherst, Massachusetts, and we've taken her up on that suggestion and invited the On Point Money Ladies Michelle Singletary and Rana Foroohar back on our show today. They're here to answer questions about the economy and tell us what we might expect. In 2024, Michelle Singletary is personal finance columnist for the Washington Post.

She writes the nationally syndicated column, The Color of Money. She's also author of the book, What to Do With Your Money When Crisis Hits, A Survival Guide. Michelle, welcome back to On Point.

MICHELLE SINGLETARY: Oh, thank you for having me.

BECKER: And Rana Foroohar is a CNN global analyst and the Financial Times global business columnist and associate editor.

She's also written several books, including Homecoming: The Path to Prosperity in a Post Global World, and Makers and Takers: The Rise of Finance and the Fall of American Business. Rana, welcome back to On Point.

RANA FOROOHAR: Oh, thanks so much.

BECKER: So happy new year to you both. Happy new year.

SINGELTARY: Happy New Year.

FOROOHAR: Happy New Year.

BECKER: Carol from Amherst who called us talked about the elderly, debts, the commercial real estate glut, just some of the issues that we do hope to get to this hour. But I want to follow up on something that you said last year, Michelle, and that was your goal for 2023, which was paying off your mortgage.

Did you do it?

SINGLETARY: I did! Yay.

FOROOHAR: Oh! Congratulations!

SINGLETARY: Yay! I got rid of that bondage! Oh my gosh!

BECKER: Yeah. How'd you do it?

SINGLETARY: Over the years, my husband and I made monthly principal payments to our mortgage. And then when we had windfalls, we would add that. And then the last part we did we recast our mortgage, which basically, we kept the terms, but we put a lump sum down and that brought it down.

So that helped us in the last stretch of it. And part of the reason why we paid it off is my husband retired last year. And so we wanted to make sure we had a good cash flow at a time when the market was very challenged and we didn't want to have him tap his, he worked for the federal government, his TSP just yet.

So there were all kinds of reasons why we paid it off early. And my goodness, it started a huge kerfuffle. (LAUGHS) When I wrote about it, people were like, what's wrong with you? Cause we had a very low interest rate and people were just outraged that we got rid of our debt. And to them, I said, that's for us. (LAUGHS)

BECKER: And your credit score actually dropped, you wrote, is that right?

SINGLETARY: Yes, I've had a 850 perfect credit score for several years and paid off my mortgage. And one month later it dropped. I was just like what? And part of the reason why is because we paid off our mortgage. So that type of debt was removed from the picture, and it lowered it.

So now it's a paltry 847 or 846. So I want my four points.

FOROOHAR: I find it so interesting that your score went down when you paid down debt, because it says so much about the financial system. The financial system loves debt. That's how banks make their money.

BECKER: You mentioned the housing market being challenged. And of course, we all know that higher interest rates, then certainly the very, very low rates that we saw during the pandemic, low inventory.

Rana, what about you? What advice do you give to folks who are looking at the housing market and wondering if they should sell or maybe if they should buy in 2024?

FOROOHAR: Yeah, the housing market is just, it's endlessly fascinating to me right now. And it illustrates all the many vectors, positive and negative that are in play right now in the U.S. and the global economy.

So let's start with just a little bit of history. House prices have been ticking up for some time, because if you go way back to the great financial crisis in 2008, you had a lot of money, Fed, essentially, did a helicopter of money to try and raise housing prices, raise asset prices, stock prices to what I would say artificially buoy the economy.

It does make people feel richer when home prices go up, when stock prices go up. And to a certain extent that's a good thing. But I think that we got maybe more than we needed in that respect. Because you got, and this happened again after COVID, you get low rates, you get in that case, fiscal stimulus, which I do think it was a good thing to bail out consumers and workers that lost their jobs, but essentially, you've had a housing bubble that's been created for the last 15 years or so, so prices are pretty high.

Then, suddenly you get some inflation, post COVID inflation, you get rates ticking up, and then you've got this sort of perfect storm of prices are high, rates are going up, but prices aren't coming down. Now that's interesting, because usually those things would move counter cyclically, usually if interest rates go up, then housing prices would fall.

But there's some other things happening that are making the housing market stay really buoyant right now. We have a housing shortage in this country, millions and millions of units short on housing. You also have a lot of people like me, for example, and I guess Michelle, until recently, that are locked into low-rate mortgages.

So I live, and this is a really interesting phenomenon. I live, I'm about to be in a house that is frankly too big for me. I have one child that's left for college. I have another child that is leaving actually for Boston, Northeastern next fall. And so I'm going to have too much house.

My husband and I would love to be able to sell and move someplace smaller, but unless we pay all cash, we're going to be left needing to pay a much higher mortgage rate than we have right now. So the math of us moving doesn't make sense. And that phenomenon is going to stretch out for five years.

Possibly even 10 years, as these mortgages reset. So I think it's going to be harder for the housing market to get back to normal, than it has been in the past.

BECKER: We asked listeners to bring forward their questions for you if they had them. And we did hear something along this, along these lines from Elizabeth from Seattle.

She left a question about interest rates and mortgages on our On Point Vox Pop app. Let's listen.

ELIZABETH: I'm planning on retiring sometime in the next two years, but with a 2.8% mortgage right now, it's a little hard to think about moving, even though I live in an area I may not be able to afford to live in retirement.

So I'm wondering what to do with my house next. That's my big economy question.

BECKER: 2.8%. Those days are gone. Michelle, what advice would you give her?

SINGLETARY: I'm in the same boat. Our mortgage was 2.75% and we paid it off. And again, you mentioned how people were just outraged that we got rid of that debt at such a low rate.

And we have a fairly sizable house, but in our case, all three of our young adults are still here. But my husband and I have considered downsizing, but it doesn't make sense for us. Because we'd have to spend way more to buy even a smaller house and so for those who are in that situation, you just have to look at, you know, where else you might be able to cut, if you've got a very manageable mortgage and there's nothing to do with that.

Then you just got to look around elsewhere on things. So we have, my husband, I've been combing through all of our expenses, cutting back on things, making sure that the cash flow situation for us works, even though our mortgage is paid off. And that's what I've been telling people. You really, this is the perfect time of year to really go through all of your statements and see where you can cut and, in some cases, if you can't make it work, you've got to think outside the box.

Maybe if you've got young adults and they're living somewhere close to you, they move in with you, or you rent to someone. To make ends meet.

BECKER: But buy or sell this year, or no? Stay out of the market for the time being and let it stabilize a bit? Rana?

FOROOHAR: Depends on geography.

One thing we haven't even gotten into yet is how the pandemic really affected the housing market, because you saw huge migrations from the East and West coast to the West and the South. You have certain markets, places like Charlotte, for example, Austin, Florida, my goodness, Texas, where, you know, the housing prices have gone way up.

You still have some areas, Chicago, I have a daughter in Chicago. That's a city where you can get real estate priced very favorably relative to other large metropolises of the same size. So there's really not one, I would not say that there's a national real estate market story anymore.

There are lots and lots of fragmented local stories, and you really do have to dig in, as Michelle says, to your particular finances and where you are geographically. And do we expect interest rates to go down in the new year? What would you say, Michelle?

SINGLETARY: The Fed has said, listen, things are going well.

The inflation is coming down. They have paused and said they will pause. However, there was a but in that, but if things start to look shaky again, the rates could go up. But I think, at least for this first quarter, I think you can say, rates might stay where they are. But that doesn't mean that those of you have credit card debt, that it's still very expensive debt.

Certain debt is still very expensive and it's going to take a while for that debt to come down.

BECKER: And I wonder, as long as we're on this topic, Carol, who we went to in the beginning, who suggested that we have you on and talk about the economy today, and we took her up on that. Of course, she mentioned commercial real estate, and I wonder how that glut of commercial real estate, because so many people are now working remotely, what that does overall. Any effect here in the minute we have before we go to the break, Rana?

FOROOHAR: I think that it's a huge issue, and it's been a looming threat even before the pandemic. But of course, as Carol pointed out, after the pandemic, you have a ton of people working from home. Many companies will never go back to five days a week in the office.

It is absolutely one of the big risks out there in the economy at the moment. And I think that issues like that, coupled with conflict in the Middle East, war in Ukraine could push interest rates maybe not up, but I think could change the inflation picture in ways we may not be fully considering yet.

Part III

BECKER: Michelle, let's start with you. Why is there such a disconnect, that people are seeing these economic indicators, that are overall positive, but for them, the economy's not working and they're blaming policy makers and political leaders for this. Why are we seeing such a big disconnect here?

SINGLETARY: I think we go back to the call from Justin, they are at the pump, they're pumping their gas. They know it's been up. He talked about buying soda and how the soda's up, although I'd say you can eliminate that by just drinking water, but we look at our daily lives and we measure the politics about what's happening to us.

And there's this anxiety because of inflation. And even if you're not in the housing market, we're talking about it all the time, you know, it costs so much to get a house. And then you take on that anxiety. And I think that's where you find that disconnect. There's no disconnect for people who are struggling. They've been struggling and they're like, "Help me. I can't pay for my medicine.

And so I'm going to choose to only take my medicine half of the dosage because I got to stretch this." And so I think there's where you see the disconnect. We really are a country of two tails of consumers, those who are doing well and still feel like, "What I can't buy, that $8.99 soda." To someone who's saying, "I can't put enough food on the table for my kid." And so if you're not that ladder, I think you need to really look at how well you are doing and how you can help and how you vote and who you vote for. I'm not going to tell you who that, I'm just going to tell you that we can't just look at how we are doing.

The economy is better when everybody is doing better. And that, to me, that's the difference. I was at a luncheon and this business owner was talking about, "Oh, I've got to pay my workers more, minimum wage, and I've got to raise my prices." And I'm thinking, "But of course, they need a living wage."

And at the same time, this person was talking about buying some million dollar or million two, house in Florida. And I'm thinking, really, dude seriously, you're complaining about somebody making $15 an hour. You're talking about, you need to buy a $2 million house in Florida.

That's the disconnect right there. I didn't say no, it was a friend of mine.

FOROOHAR: But you know what? I want to build on this because these are some really profound points that Michelle is making. First of all, that's absolutely true that when inequality is lower, you get a more stable economy. There's often this myth that you have to have inequality to have higher growth.

That's in the last 40 years or so, that's been increasingly disproven because inequality creates more financial crises, you get bigger debt buildups because you're essentially trying to paper over the fact that lower wage people are not able to pay their cost of living. And they can't keep pace with inflation with debt.

So that's when you get big credit card debt problems. You also get political instability. And I have to say, I do feel like this country is at a real pivot point moment. Where we have a real, Americans are very individualistic, right? And on the one hand, there's some great things that come out of that.

But on the other hand, there's a sense that I got mine, Jack, or this sort of myth of bootstrapping, that everybody can just pull themselves up. Well, one of the reasons that people can pull themselves up historically in this country is that we have a public education system that's decent, that you have cheap enough land that you can move West, that you could build and buy and grow, that's becoming less and less true.

And that is going to come with some extreme consequences if we're not careful. And those consequences will eventually touch the lives politically, socially, economically of the wealthy, as well as the not so well off.

BECKER: And do you think the economy is going to be a big factor in the upcoming presidential election?

FOROOHAR: Oh, 100%.

BECKER: Rana ... you say yes?

SINGLETARY: Oh yeah, definitely. Oh, absolutely. Yeah.

BECKER: So both of you do. What about the effect of politics on people's thinking? We heard from Cal in Spokane Washington, and he says, there's a lot going on here and there's a lot and it's really kind of anxiety provoking about politics and the economy.

Let's listen.

CAL: My biggest concern about the economy is politics. If something were to go bad in November and there were to be large upheavals and civil disturbances, it could really affect the economy and affect our ability to run this country. That's really the biggest threat right now.

BECKER: I wonder, Rana, do you think that potential instability around the presidential election is something that's in people's minds right now as well?

FOROOHAR: Absolutely. And I'm just, I'm an opinion columnist and I'll just, cause I'm a registered Democrat. I don't think that's a big, surprise to anybody, but I'll just go ahead and say what I think is going to happen politically around the elections. I think, let's just say that you were to get a Trump victory.

I've written a column about this recently. Some people would say the last time that we had President Trump, you got higher stock markets, you got tax cuts, there was a sort of a temporary stimulus effect. I don't think that would be the case this time. I think what is going to happen, if you were to get another, if you were to get Trump 2, I think that you would get a much more insular, defended president. I think you would get some really hardline tariffs that would have a big hit in the stock market. I think that you would see borrowing costs go up, because you would see allies and adversaries alike worried about this political stability of this country.

So yes, I am very worried and I'm just going to say it. I think that it is a moment where people need to think carefully. I also think, just to go back to why people haven't really registered on how great this economy is, given all the headwinds, two things are in play here. One, consumer sentiment is a trailing indicator.

So I think it takes not just one, but two, three, four quarters of, okay, the jobs, numbers are still pretty good, and inflation is coming down. And for people to really take that in. So I think you might start to see that in the first half of this year and people feeling more comfortable.

I also think it's very difficult to message counterfactuals. Let's just look, had you not had a very smart administration in which everybody was rowing in the same direction, and you had some very smart handling of policy from the White House and the Federal Reserve, as well, we could have had a great depression.

We had two hot wars, we've had a pandemic, we have a major decoupling going on with China, our largest trading partner. All kinds of things happening. Things could have been so much worse than they are. And in fact, we're in a kind of a Goldilocks period, but it's difficult to get people to understand that. Because counterfactuals are hard to message.

BECKER: Michelle, I hear you too. Did you want to jump on that? It sounded like you wanted to add to that.

SINGLETARY: I love Rana. She says it so much more eloquently than I do, but no, it's absolutely true. And there are some things coming down the road that we have to deal with, like social security. If we have a split government, and not just a split government, but a government which can't do anything, because they're fighting over nonsense, then we are not going to get a legislative body that is looking at health care, drug prices, social security, which is not bankrupt, but it's going to have a funding issue sooner rather than later.

And health care and childcare and all those things that need to be people coming to the table who are sensible and looking out for all of America, not just their pocket of America. And that's what I fear that we will, we didn't get much done other than maybe the Inflation Reduction Act this past year. Because they're just idiots. I'm just going to say it. There's so many idiots in congress and they are so removed from the regular folks who just want to buy a house at a decent rate, want to send their kids to school, where they don't have decades of debt. Want to buy their drugs for their illnesses. Or go and have preventive health care, so they don't end up with diabetes.

And we don't have a legislative body that is cogent enough and focused enough on that to come together, for policies that will benefit all of America. And I just, I fear, like Rama, what will happen in November. And I just, I worry. And I see the regular people. I have a ministry at my church, so I work with people at all income levels.

And I see those who are struggling, and I see those who are doing well. And I would just, I would love for a more focus on the policies that will lift a lot of people up. And, a lot of people, they just want a living wage and an ability to send their kids to college or buy a house or buy a car that doesn't take them eight years to pay off.

BECKER: I want to talk about predictions for 2024. We're kicking off the new year, and I want to know. I know we've talked about some of them, but I would like to hear both of you reflect on what you think will be some of the strong points, and the weak points in the year ahead. What would you say, Rana?

And I have to ask, is crypto finally dead? We need to know.

FOROOHAR: (LAUGHS)

BECKER: I just have to get that in here, before we --

FOROOHAR: I hope so. Oh man. Yeah. I think I've been on this show saying, please don't buy Bitcoin. Yeah, I think a lot of people at this point realize, boy, that's a heck of a speculative asset. And I'm out of there. We can talk about digital currency another time.

I do think that there's a place for it, Central Bank backed digital currency is a whole another thing, but crypto. Yeah. Don't touch it with a 10-foot pole. In terms of predictions, one thing I'll say, and maybe I'll try and end on a bright note here. I've been doing this job for 33 years.

Often the action is where we aren't looking, and where we aren't thinking, what we aren't talking about. And there are a lot of things that we can be worried about. We've talked about many of them on the program already, but there is an optimistic story as well here. We have, thanks to the smart handling of the Biden administration and some very lucky tailwinds to the U.S. economy, we've gotten through a lot of bad moments.

It is possible if the Fed is right, and three more, and they've said this, which is very rare for the Fed to say, we think we can do three rate cuts. And that we will not need to disrupt the labor market to do it. Let's take them at their word. If that's true, that's a pretty good picture for the coming year.

That's not to say that you might not see some action in the stock market. But that's about as good of a prediction as one could hope for in 2024. And fingers crossed that Jay Powell's right.

BECKER: And what would you say, Michelle for predictions for 2024 and about crypto?

SINGLETARY: Crypto is just, you're an idiot.

BECKER: (LAUGHS)

SINGLETARY: Stop buying it.

FOROOHAR: Done. Mic drop.

SINGLETARY: It's so speculative. I know for the regular person if you don't have money that you can just burn, then don't do it. I am concerned, predictions about credit card debt. It hit $1 trillion in 2023. And it was a robust holiday shopping.

So I am concerned about the amount of debt that people are racking up and then carrying over, more than about 50% of people don't pay their bill off every month. But I am optimistic. I know I went on this whole rant about cars and stuff like that, but I am optimistic that we did skirt a big, huge thing in 2023.

Everybody was like 50/50 recession. And so I'm optimistic that we will hopefully get a legislative body in November that will come together to deal with some of the issues that are utmost importance to Americans in terms of health care, drug prices, childcare, and social security. I'm very concerned about that and I'm hoping that they will take that mantle up.

I'm optimistic that the government has put more money into the IRS. To hire more people, make it easier for people to file and also collect. Because hey guys, I know we all fear the IRS. But they actually collect the money that runs the government. And that they can collect more of the money that is due from those wealthy folks who are not paying their fair share.

That's better for all of us. So I'm optimistic about that and I'm not typically a half glass full kind of gal. But I am, because I see what is happening and I see people's paychecks. And I see their bank accounts. And I know that there is room for people who can to do better, and I think that having skirted the recession.

Hopefully that's a wakeup call for people to know that if you've got room in your budget, you need to save more, save for retirement, cut that credit card debt, and then be generous to the people around you. If you've got space in your home and you know someone needs help, help them. So I'm optimistic about 2024.

I think we're going to have more in 2024.

BECKER: Alright, more in 2024. You've got a slogan in everything, Michelle.

SINGLETARY: (LAUGHS)

FOROOHAR: That's a bumper sticker.

SINGLETARY: (LAUGHS)

BECKER: Pretty good. That's pretty good.