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What percentage of Americans have iPhones? (Scroll to the bottom to find out!)

IN THE NEWS

🔌 Why a Tiny USB-C Port Is a Huge Deal for Apple’s Consumers

Photo by Vista Wei on Unsplash

The big news: The company responsible for the world’s great blue vs. green text divide revealed plans to transition from its proprietary Lightning charger to a USB-C port with the iPhone 15, marking a milestone towards universal charging for its user base.

• USB-C ports are used broadly in many non-Apple devices, simplifying the charging experience across different products and brands.

Two-finger zoom out: Apple’s exclusive Lighting cable has been a part of every user’s “standard Apple kit” for 11 years.

All four newly introduced iPhone variants, including the standard, Plus, Pro, and Pro Max models, come equipped with USB-C ports for universal charging and are priced without any increase from the previous line-up.

• According to the company, Apple sold over 230 million iPhones worldwide last year. In the third quarter of this year, revenue from iPhone sales surpassed $39 billion, accounting for more than half of Apple’s total revenue.

Why it matters:

If you’re an Apple user, you’re probably familiar with the frustration of shelling out money for Lightning cords — which go for $19-29 a pop — incompatible with any *gasp* non-Apple devices you own or even just different types of Apple devices.

• Introducing USB-C ports across Apple’s product range means users can use a single USB-C charger for their iPhones, iPads, and Mac computers.

Driving the news: Apple isn’t making the switch just for your sake. European Union (EU) legislation mandates that by December 2024, phone makers must standardize charging connections to reduce waste and save consumers money — that pressure is undoubtedly a factor here.

And, of course, convincing users to upgrade iPhones every few years is a core part of Apple’s business model. Are USB-C ports enough to do that? You tell us.

• According to Apple, a recent dip in iPhone sales stems from consumers holding onto older devices for longer, often due to budget constraints or the perception that new updates offer only minor improvements and aren’t life-changing for the users.

Market sentiment: Investors weren’t exactly wooed by the new iPhone upgrades. Apple stock closed down 1.7% on Tuesday and continued to fall modestly on Wednesday.

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🔥 August Inflation Comes in Hot

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Up for debate: Whether that’s emblematic of a broader, stubborn inflation problem is hotly debated by economists and on Wall Street.

The counterpoint is that much of said jump was driven by a spike in gas prices, which tend to have greater and more random fluctuations than prices for groceries, apartment rents, clothes, etc.

• Surging gas prices alone drove more than half of the increase in CPI, a trend (hopefully) unlikely to continue.
• Still, the CPI is up some 3.7% from last year. On an annualized basis, the CPI rose at a 7+% pace. That grossly extrapolates a one-month trend forward, yet the point remains.

Why it matters:

The Fed’s view: To assess more tangible inflation patterns, the Fed focuses on “core prices” — changes in CPI excluding food & energy. Using that metric, the picture is better: Core prices rose 0.3% in August. That surpassed forecasts and reflects that the Fed’s efforts to tame inflation aren’t finished but presents more reasons for optimism.

• However, the point is an academic one. To regular Americans, August was a bad month, adding to the increasing unaffordability of daily life that’s bombarded millions since the middle of the pandemic.
• The Fed meets later this month to set interest rates again. While the consensus before was that they’d “pause” (leaving rates unchanged), the pressure to hike rates more this year is greater after this inflation report.

From Bloomberg

A recent Bloomberg survey of moneyed investors — respondents with at least $100,000 in investable assets — revealed that almost half of all affluent investors in the U.S. said inflation is “killing their dreams of retirement.”

• The problem is presumably worse for everyone else dreaming of retirement since higher prices make saving harder.
• And for those already retired, living on fixed incomes, inflation injects uncertainty into their planning and devalues their life savings.

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👅 This Startup Wants to Give You a 3% Mortgage

Gif by Friends on Giphy

If a bunch of potential homebuyers were told today they could get a 3% mortgage, would it be misleading? Well, yes (the average mortgage has a 7% interest rate these days!), but also, no.

At least, not if the real estate startup Roam has anything to say. The company is hoping to popularize a novel solution: Assumable loans.

• This workaround lets sellers transfer their mortgage loans to buyers alongside the house.

Hope for homebuyers: On paper, it’s a great idea — house hunters disheartened by the historic surge in interest rates can inherit a more affordable loan, while sellers can earn a higher price for their home (by attracting more bids from prospective buyers who can pay up with a lower rate.)

• In reality, as the Wall Street Journal puts it, “Few consumers know about the option, and fewer still follow through with it.”
• The Federal Housing Administration has only processed some 3,300 mortgage transfers this year.

Most borrowers still have low-rate mortgages, and prospective buyers want them

How it works: Under these assumable loan transactions, the home seller is no longer responsible for the mortgage, and the remaining loan balance is subtracted from the home’s purchase price — the home buyer takes over the mortgage and must come up with the cash to cover the difference between the purchase price and the mortgage amount.

• Sounds great. Now imagine, though, a $600,000 home with a $350,000 mortgage — the buyer would need to pony up $250,000 in cash. If you couldn’t front that money, you’d need a second loan.

Why it matters:

Not all mortgages are eligible, but it’s estimated that about 22% of active mortgages could be transferred, which is enough to still be consequential, assuming Roam can bring its idea mainstream.

Viable business model? Roam’s vision of bringing American homebuyers cheap mortgages begins in Georgia, Arizona, Colorado, Texas, and Florida. The company will identify and advertise listings eligible for mortgage transfers and assist with the corresponding paperwork and bureaucratic hoops.

• Roam plans to make its money by collecting a fee equal to 1% of a house’s purchase price.
• That’s compensation for helping with the process and recommending lenders provide additional financing as needed (to close the gap between a home’s price tag and the mortgage outstanding.)

The company has just 10 employees and $1.25 million in venture capital funding. Still, it’s taking on the status quo in mortgage banking, where lenders typically drag their feet on these mortgage transfers due to the low fees they earn for processing them.

• Perhaps a bigger challenge: Finding folks willing to part with their low-rate loans.

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See you next time!

That’s it for today on We Study Markets!

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