The desert mirage of easy housing profits – Phoenix Arizona home prices on track for four consecutive years of year-over-year home price declines. 55 percent fall from peak and nominal home prices back to 2000 levels. What happens when investors dominate the market?
The foreclosure epidemic in states like Arizona and Nevada is breathtaking and incredibly disheartening. Prices have cratered much more quickly than the methodical rise up in the last decade. Home prices in Phoenix now sit precariously where they did in 2000 without adjusting for inflation. These desert communities largely built on a dream, fast construction, and unsustainable notions of cheap energy are putting strains on local infrastructure. Now that the housing bubble has popped with a loud bang, you are now seeing a prolonged period with many investors rushing in to buy cheap places. Yet the market is being flooded with investors lured by cheap prices and many are now competing with one another. The data is startling because you find a surreal market being fueled by investors seeking long-term investments. Yet the challenge of course is assuming you have a steady employment base to rent a unit out. Cities like Detroit have shown that populations can leave once an industry implodes like manufacturing and home prices that may seem cheap may even get cheaper since construction was such a staple for these areas. When we gaze at empty subdivisions with the blistering desert heat, you can’t stop to think about ancient ruins that once were populated and vibrant only to be retaken by nature.
The walking debt – U.S. public debt now surpasses $15 trillion. The financial sector has wreaked disaster in the American economy. Wall Street banks cause havoc in housing and student loans.
It can be argued that the world is suffering from an epidemic of chronic debt. The financial sector loves to play on words and would rather call certain debt issues as a credit crisis as if it were a temporary thing like a mid-life crisis. This is also similar to renaming junk bonds to something more user friendly like a household pet, high yield bonds. There seems to be a naïve euphoria that the problems in Europe are now resolved. Nothing has been resolved aside from forcefully cramming down write-downs and creating more debt to bailout more financial institutions. As the markets rally on this news we have now officially crossed the $15 trillion barrier with total public debt in our own nation. The world continues to fuel a debt induced problem with more debt. Our entire system has been captured by this financialization where everything from a college education, to automobiles, to purchasing a home have become mechanisms to enslave people with ungodly amounts of debt and send profits to the few in the gilded financial class. As this goes along the elite in the financial sector become wealthier while the majority of Americans are left behind.
The glory of debt spending and casino financial markets. What is the typical income, tax situation, and household income for Americans? Americans claiming student loan deduction surges from 4 million to 10 million in roughly one decade. According to IRS AGI needs to be above $1 million to qualify for top one percent.
This weekend I spent time digging through IRS and Social Security data to get a better perspective on working and middle class Americans. I find it amazing that in a consumer driven economy, meaning we live to spend in some respect that the media never even bothers to focus on household incomes. Even on self branded “business†programs with fancy watermarks which tout their major expertise on knowing about Americans they fail to do any analysis on income. Need we even point out their missing of the biggest economic recession in our recent history? This silence as you know is purposeful. The media is largely beholden to advertisers and it might be perceived as a downer to tell the public how far back they have gone in the last decade on the income treadmill. It is understandable although not acceptable that large television outlets do not discuss wages and income but what about the respectable press? Where is there voice? Either way, as we dig into the data it is understandable why so few even bother to cover this unsavory topic.
Crossing the student debt point of no return – for-profit colleges have default rates now rivaling subprime mortgage debt. $1 trillion in student loan debt on the horizon while college graduate wages fall for the decade.
The student loan market is back in the news as it makes its unrelenting march to the $1 trillion mark. This crippling figure comes in the face of a decade of lost wages for middle class Americans. Just like the housing bubble people were supplementing a disappearing middle class with more debt. The allure of housing was that never in our history have we seen national home prices fall, until they did in dramatic fashion. The same cultural nostalgia for education in every respect has created a zombie higher education system that is now expanding like the mortgage markets at the height of the housing bubble. Why? For-profit schools have largely lured in countless Americans into a system that has provided very little economic gains for students while enriching these Wall Street listed companies. It should come as no surprise that the highest default rates stem from the for-profit system and most of these loans are federal loans. In 2010 there were $100 billion in student loan originations, the highest ever in the midst of the deepest recession since the Great Depression.