5 Things That Will Get More Expensive in 2024 Even as Inflation Falls
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Good news first: Inflation is steadily cooling, and the Federal Reserve appears to be winning its ongoing fight against rising prices.
While inflation isn’t quite yet where the Fed would like to see it — around 2% — recent readings show it’s getting close. And a recent projection from the Congressional Budget Office found that inflation could cool to 2.1% in 2024.
These reports are undeniably good news, but some experts say it’s too soon to declare victory.
“The more benign inflation data is certainly something to celebrate, but there is some turbulence ahead,” Omair Sharif, founder and president of Inflation Insights, wrote in a note Friday.
As we head into the new year, it’s important to have realistic expectations. Broadly speaking, prices are expected to grow at a slower rate than they have been lately — a shift economists call disinflation. This is very different from deflation, a period where prices fall and consumer goods get noticeably cheaper.
Overall, prices will likely continue to moderate and, as wages rise, become less of a burden on people’s budgets in 2024. But that's not the case for every expense. Some goods and services, experts predict, will actually balloon in 2024.
Here’s a look at what’s likely to get more expensive next year, even as inflation calms down.
1. Auto insurance
Car insurance costs have been far outpacing overall inflation lately, posting a year-over-year increase of more than 19% in November, Labor Department data shows.
Experts say the trend is expected to continue into the new year, as expenses remain elevated for car insurance companies.
According to the nonprofit Insurance Information Institute, severe weather (which leads to an increase in auto accidents and vehicle damage), increased labor costs and pricier repairs are major contributing factors to high policy prices.
2. Some electric vehicles
The last several weeks have been one of the best times ever to buy an EV. An oversupply of EVs on dealer lots paired with a tax credit of up to $7,500 (courtesy of the Inflation Reduction Act) meant deals were — and still are — abound. That window is rapidly closing.
Starting on Jan. 1, 2024, stricter rules related to where EV batteries are produced will go into effect, and several popular EV models will lose their eligibility for the tax credit. Industry experts expect the Tesla Model 3 (and possibly the Model Y), the Cadillac Lyriq, the Chevy Blazer, the Mustang Mach-E, the Lincoln Aviator Grand Touring and others to lose part or all of the tax credit incentive.
While the sticker prices may or may not change much for these EVs, the out-of-pocket costs for buyers who don't receive the tax credit will.
One silver lining: Starting in 2024, the tax credit can be applied as a discount on qualifying EVs at the time of purchase as opposed to claiming it on your taxes.
3. Health insurance
As of now, health insurance is one of the few areas that inflation has yet to have much of an impact on. Next year, that’s expected to change. Hospitals and health care providers have been dealing with elevated costs of supplies and labor all along, but those expenses have not fully seeped into insurance prices yet, experts say, because insurance contracts are typically negotiated far in advance, sometimes by three years or more.
In 2024, the firms Mercer and Willis Towers Watson predict that health insurance plans through the workplace could jump about 6% in price.
According to the nonprofit Kaiser Family Foundation, workers paid on average $6,575 toward the cost of health insurance coverage this year. A 6% price increase would translate to about a $400 annual increase to your out-of-pocket premium costs for coverage through your workplace.
4. Homeowners insurance
2023 was a year of exodus for many homeowners insurance companies pulling out of areas deemed high-risk for severe storms, flooding, hurricanes and wildfires.
Farmers Insurance, for one, stopped offering new policies in Florida. State Farm and Allstate pulled back from California, and AIG limited home insurance sales in a handful of states.
As a result, homeowners were forced to find coverage through excess and surplus insurers, or "insurers of last resort," which can charge exorbitant prices to policyholders. All this led to home insurance premiums soaring by 21% in 2023, according to the insurance marketplace Policygenius.
Due to more severe weather and fewer insurance options, the insurance firm expects prices to keep trending higher in 2024.
5. Restaurant food
If cooking more meals at home isn't already on your list of New Year’s resolutions, maybe this will nudge you to add it.
“Food away from home” — economic parlance for restaurant food — is expected to climb in price by about 5%, according to a forecast by the U.S. Department of Agriculture (USDA), with a projected range of 3.2% to upwards of 6.6%.
On the other hand, “food at home” aka groceries, are expected to drop in price by 0.6% (yes, actual deflation, here).
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