Wikinvest Wire

We only thought we were getting wealthier

Thursday, April 10, 2008

The Pew Research Center has a great new study out that adds to the growing consensus that things aren't so hunky-dory these days for large swaths of the U.S. population. With the title "Inside the Middle Class - Bad Times Hit the Good Life", it's not hard to figure out what the conclusions are - it's just a matter of severity.

The full report is 169 pages, but, after searching around a bit, this table caught my eye. Since the data for this series stops at 2004, one can only imagine how the numbers might look today after a few more years of housing market excess.
It wasn't so much of a "housing boom" as it was a "debt boom" and, again, the changes in the table above from 2004 to 2007 would probably knock your socks off.

Some of the key findings from the report:

  1. Fewer Americans now than at any time in the past half century believe they're moving forward in life.
  2. For decades, middle-income Americans had been making absolute progress while enduring relative decline. But since 1999, they have not made economic gains.
  3. For the past two decades middle-income Americans have been spending more and borrowing more. Housing has been the key driver of both trends.
  4. At a time when these borrow-and-spend habits have spread, Americans say it has become harder to sustain a middle-class lifestyle.
And to think that, when home prices were soaring just a few years ago, we all thought we were getting rich.

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4 comments:

T-bone said...

Interesting post. Though, depending on one's circumstances, having most of one's debt backed by your house could be a good or bad thing. Good scenario: I have no credit card debt, no car debt or student loans, all I have is my mortgage, which was not inflated to pay off other debt, or does not have a HELOC attached. Bad scenario: I have no credit card debt, no car debt or student loans, because when I bought my house I borrowed 110% to pay off that debt, and have since HELOC'd to cover more purchases. Sadly, I think more and more households are the latter case.

Anonymous said...

"And to think that, when home prices were soaring just a few years ago, we all thought we were getting rich."

That's funny Tim. It reminds me of looking at a camera in Best Buy and telling the clerk it was too expensive. She says I don't have to pay for it for two years. My wife told her we still have to pay then.

Borrowing that equity and now figuring out they have to pay it back. Amazing.

Anonymous said...

I tihnk the data in this post clearly shows that when taxes were reformed to remove the deductibility of all other interest paid except for the mortgage interest, that is when the general public turned their home into an ATM.

Anonymous said...

From an Australian critics perspective on housing affordability and how the institutions judge look at:

http://www.abc.net.au/rn/ockhamsrazor/stories/2005/1335462.htm

Note the date. I would not blame the government alone for the current mess.

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