Apr 29 2010

Not all is well on the housing front. Housing still too expensive for middle class Americans – 9 Years of Housing Inventory and 7 Million Homes 30+ Days Late or in Foreclosure. How the government is keeping and encouraging expensive housing.

Since the recession started in December of 2007, over 7 million foreclosures have been initiated.  In no other time in history have we seen this magnitude of problems in the housing market.  And these problems still persist.  It is estimate that another 6 to 9 million homes are at risk of foreclosure in the upcoming years given the current economy and overhang from the housing bubble.  If we measure the health of the housing market through foreclosures, we are only half way through this housing calamity.  In many ways, the problem still stems from homes being too expensive relative to the income people make.

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Apr 26 2010

How much do average Americans make after the Great Recession? Examining the income of U.S. households. 65 percent of U.S. households live on $65,000 or less.

In order to understand the middle class, we first have to draw a line in the economic sand.  Many in our society would like to believe that we live in a classless system but this isn’t true especially when we look at the financial data.  This classless belief has been shattered with the current structure of the banking bailouts that have favored the top 1 percent in our country.  I wanted to update some of the data that I had posted back in December of 2008.  There is something fascinating about looking at aggregate income data because it tells us a lot about our financial condition.  Yet whenever we hear debates about the middle class, rarely does anyone talk about the specific income cutoff.

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Apr 24 2010

The Futile Act of Saving in America Today – No Money Down Car Purchases, Low Down Payment for a big Mortgage, and High Interest Credit Cards for Everyday Spending.

This recession did change spending, at least for a few months.  When the recession hit Americans had a negative savings rate, the first time ever we had the ability to spend more than we actually brought in.  As the recession progressed, Americans did start saving and we took the personal savings rate to 6% (this may sound low but it is much better than 0) and with this we were back to the early 1990s savings rate.  Yet that hasn’t lasted.  The savings rate is now below 4 percent and retail spending is now up strongly.  Given the balance sheet for most middle class Americans this is not a good sign but shows the “spend until you go broke mentality” is alive and going strong.  But part of this is largely engineered by the Federal Reserve and U.S. Treasury.

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Apr 22 2010

$10 Billion a Month Freed up Each Month from People not paying their Mortgage. $1.9 Billion of That is in California so People can continue Leasing their SUV Mercedes and Getting Tans. Thanks Bailouts!

Living in California, the central hub of housing bubble mania, I have come to realize that many people that overpaid for homes are now quickly shifting their mindset to one of non-payment revolt.  With the 24 hours news cycle and instant viral financial information, many are now realizing that strategically defaulting isn’t such a bad option anymore.  In fact, this is now a significant strategy for many.  The corrupt bankers and Wall Street have set the example so people figure why shouldn’t they follow the same path?  But the problem with that is someone still ends up paying.  And that is the prudent middle class.  Look at it this way.  We have 51 million homes with a mortgage.  Over 44 million Americans are paying their mortgage diligently.  Yet our economy is screwed because we are bailing out the bankers and Wall Street but also giving incentives to many others to walk away from their home or game the current bailout structure.

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Apr 19 2010

The Future of U.S. Housing – Projections of Household Formation, Loan Modification Data, 500,000 Option ARMs Still Active, and a Decade of Stagnation.

Take what you knew about projecting housing for the last fifty years and throw it out the window.  The big problem with using models post-World War II is that they base growth on a baby boomer population that was the largest affluent middle class cohort known to the world.  That model is now disappearing.  Some point back to the Great Depression but forget to mention that life expectancies in the first half of the 1900s weren’t that fantastic.  So you had a population that was constantly churning and emptying out homes that many had paid down.  Yet after World War II the Levittown model of housing took hold with suburban life being the driving force of future home building.  When linked up to cheap oil and 30 year fixed mortgages this seemed to be a good balance for entry into the middle class.  Those days are seemingly no longer here.

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