Housing, Energy and Investing

A roof over your head and gas in your tank cost more than ever. But prices for these essentials color your view of investing.

What do your nest egg, retirement planning and personal finances share with the overall American economy? Plenty, especially when it comes to the bite from energy and home prices.

In recent years rising gasoline and heating or cooling costs gobbled up family income, even as a depressed housing market erased personal wealth and left Americans feeling uncertain about their economic prospects.

According to the latest consumer price index figures from the U.S. Bureau of Labor Statistics, energy and home costs spearheaded jumps in overall prices in January. The gasoline, fuel oil and electricity prices combined to produce a 2.2% increase in the energy price index.

Nevertheless there now appears to be good news regarding stable and even falling energy prices. Gas and fuel oil costs seriously affect our economic well-being, accounting for nearly 10% of the U.S. Consumer Price Index. Those costs fell 0.8% in the past year and analysts predict they will fall 5.5% this year.

While nudging up lately, gasoline prices are still down 9.5% over the past 12 months, back to levels unseen since early 2007. For the first time in two decades, the U.S. relies less on imported oil and gas.

Development of hydraulic fracturing of shale deposits, or fracking, also helped drive down energy costs. Fracking releases previously inaccessible energy deposits cheaply by shooting water, sand and chemicals at high pressure to fracture the surrounding rock formations.

One notable exception: the price of natural gas, driven up sharply by a dearth in pipelines and which, in spots like this winter’s frigid Northeast, also drive up electricity prices.

Thanks in part to the general dip in energy costs, though, consumer prices rose only about 1.6% in the past year. Economists predict the same rise in 2014, marking potentially the first time in half a century that prices climbed so slowly in two consecutive years of economic growth.

Meanwhile, housing values slowly recover from the near collapse of 2008. According to the Case-Shiller index of home values, the average home price in metro Atlanta, where I live, increased 11.3% over the past year. Case-Shiller’s 10- and 20-city composites also show home prices increased an average 13.6% and 13.4% year-over-year respectively, with Las Vegas and San Francisco notable standouts. 

We’re not all the way back: Home prices remain down 20% from their mid-2006 peak.

The economy is hardly on fire, but these trends are two good reasons to believe that a more solid recovery and better times lie ahead.

Still, U.S. investors’ outlooks faltered at the end of 2013, according to the Retirement Optimism Index survey by Wells Fargo/Gallup Investor. Retirees and those not contributing to a retirement plan, such as a 401(k) or 403(b), reported the darkest outlooks. Surveyors carefully cited investors’ waning confidence in the economy rather than reactions to personal financial circumstances.

Your optimism fuels your desire to invest and commit to investments – especially in our recent rollercoaster market. How do you feel about the economy and your own financial prospects? More confident than a year or two ago?

How’s your mindset affecting your spending and investing? Before you send money toward Wall Street, ask yourself these key questions.

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Wes Moss, CFP, is the chief investment strategist for Capital Investment Advisors and a partner at Wela Strategies, both in Atlanta. He hosts “Money Matters,” a live financial advice show on Atlanta’s 95.5 FM and AM 750 News/Talk WSB Radio. His two books are Make More, Worry Less and Starting From Scratch. He has appeared frequently on CNBC, Fox Business Network and on Atlanta-area television. He also writes weekly about personal finance in the “Bargain Hunter Section” for AJC.com, the site of The Atlanta Journal-Constitution. Connect with Wes on Twitter at @WesMoss365 and on Facebook at Wes Moss Money Matters

This article appeared originally, in different form, on AJC.com.

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