Thursday, July 19, 2012
Until people can save from their incomes without borrowing, the economy will not be able to build future impetus. All those young people really need to save for a home deposit now. And pay back their student loans.
Existing home sales really were bad, but what does anyone expect? It takes years to build up the piggy banks to build that kind of purchasing power.
Back in 2005 I pulled together the CA income distribution data to see what % of households could actually afford a subprime loan on the median house at 7%. The answer was way, way fewer people than were taking them out. I think Wall Street has very little clue as to what a median family budget looks like. That's the only explanation for all the bullishness I hear on a housing recovery.
And that worked out so well. We are being asked to pick between Wall Street and Main Street, but it's a false choice. Where Main Street goes, Wall Street must follow.
By the by, the fellow is buying a ~270,000 dollar home, he makes 60 K his wife to be 36 K. It is one of the last vestiges of the old time consumer products field.
The other odd thing I have noted is how the young fellows want and expect to be able to buy the same sort of home as their parent had; the idea of a starter home seems to have disappeared.
It makes me glad I am not young; I think my wife and I were lucky we grew up when we did.
What kind of education/advice are these people getting??
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