Although inflation and unemployment rates are falling, many Americans are struggling to stay afloat with record-high costs of living.
At a Friday, January 19 Ethnic Media Services briefing, experts across the financial spectrum — from housing to oil to small business — discussed how our current economy is impacting some of its most vulnerable members, and suggested what’s ahead for 2024.
The struggle for housing
Even in the wealthiest regions of the Bay Area like Silicon Valley — the fifth-largest economy in the world — the struggle to find housing is communitywide, said Nathan Ganeshan, founder of homeless aid nonprofit Community Seva.
Though California has 12% of the U.S. population, it has 28% of its homeless population.
Since 2013, Community Seva has helped about 320,000 of these individuals “by serving hot meals, blankets, sleeping bags, grocery gift cards, hygiene products, temporary housing, advocacy and more,” Ganeshan said. “We shouldn’t forget how entwined the struggle for basic needs like food and hygiene is with the struggle to find housing. However much the economy is improving, it’s riskier for those on the edge if the cost of basic needs is also rising.”
In Santa Clara County alone, where 10,000 people are homeless, over a quarter of all people are food-insecure — and these risks extend well beyond those who are unhoused. Even among those in the high-paying tech world, precarity looms in Santa Clara, the state’s third-most expensive housing market.
“With the ongoing tech layoffs, we’ve seen firsthand a severe impact of housing, as parking lots in Santa Clara are filling more and more with people living in cars and RVs,” added Ganeshan. “Someone recently said to me ‘I lost my job, but I can always find another one. But I lost my house, and I can’t get another here.’”
The housing market
Home prices have drastically outpaced income nationwide because “the pandemic brought drastic changes to supply and demand,” said Rob Warnock, Senior Research Associate at Apartment List.
“Many people took their homes off the market while many others decided to buy — and skyrocketing prices didn’t slow until the middle of 2022, when the Federal Reserve started to raise interest rates — but homes are still 45% more expensive now than they were before the pandemic.”
In contrast, he continued, “Rents fell during the pandemic because there were many more vacant apartments for rent than houses for sale.”
As the economy emerged from the pandemic in 2021, rising rents worsened an affordability crisis which peaked in 2022, when over half of all U.S. renters were cost burdened, i.e. spending over 30% of their income on rent.
Since then, rents have declined 4% as the U.S. has begun a massive construction boom, explained Warnock. Last year nearly 500,000 new apartments entered the market, “with about a million more in the next year or two.”
What’s next for 2024?
“Home sale prices should continue to rise,” he said. “The Federal Reserve said they won’t raise interest rates further, and for more homes on the market, there will also be more interested buyers. However, we expect new rentals to grow strong for the next 12 to 24 months, with new apartments curbing rent costs … It’s a lesson we can all learn from: if you want affordable housing, build more of it.”
Oil and gas
Oil prices, too, are stabilizing from pandemic peaks, said Denton Cinquegrana, Chief oil analyst at OPIS.
The national average for gas in 2023 was $3.52 a gallon — down nearly 11% from $3.95 in 2022, when Russia attacked Ukraine “and there was a concern that markets would lose seven to eight million barrels a day of oil from Russia,” he explained.
“But as the year went on, oil exports continued to non-sanctioning countries like China and India,” he continued. “Though tensions are rising in the Middle East now, the situation looks similar — oil production hasn’t shut, and the only cost added is from the extra time it takes to avoid the area and ship oil around the Cape of Good Hope instead.”
In the year ahead, Cinquegrana said “prices will probably fall five to 15 cents less than 2023 — likely around $3.45 to $3.50.”
Although the nationwide electrification of cars is further increasing the supply and lowering the cost of oil, “this process is very slow,” he added. “It takes about 10 to 12 years to turn over the fleet” of over 280 million cars registered in the U.S. A stronger dampening of prices may owe to the fact that “the cars we drive now are much more fuel-efficient than they were a decade or two ago, and the fact that since the pandemic, many drivers still work from home.”
AAPI small businesses
AAPI is the fastest-growing minority community in the U.S., contributing over $1 trillion in economic output in 2021 alone and making up nearly 10% of all entrepreneurs nationwide — with 2.9 million AAPI businessowners employing 5.1 million people, said Chiling Tong, president and CEO of National Asian/Pacific Islander American Chamber of Commerce and Entrepreneurship (National ACE).
As AAPI business owners continue to recover from the pandemic, the top challenge they face is “access to capital,” she continued. “Nearly 30% of respondents to our most recent survey have very low confidence that they could fund an emergency $5,000 business expense.”
What aid is available — specifically the COVID-era Paycheck Protection Program (PPP) loans — AAPI entrepreneurs are more often unaware of, most often due to language barriers, she added. In 2021, AAPI small business owners had a 66% funding rate through the Paycheck Protection Program compared to 75% for whites.
Despite these challenges, 2023 saw an unprecedented 5.5 million new business applications filed, making it the strongest year of new business applications on record; in total, the U.S. has over 33 million small businesses.
In short, expectations for the year ahead are mixed: While 61% of owners have a positive outlook for their own business in 2024, 71% hold a bleak view of the economy itself.
These conditions mean that the economy is “the number one issue” for many in the AAPI and small business community, said Tong. “Although they feel personally positive, this is because they’ve faced three years of inflating costs and supply disruptions. In 2024, they’ll support leaders who convincingly promise a better economy ahead.”
