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March 5, 2006
Advertising: Study shows homes becoming more affordable
A recent study shows that while home prices may be increasing, they are actually becoming more affordable and now may be the best time to make a new purchase.
Source Data:
St. Louis Fed: Custom Chart
Housing is paid out of disposable income.
ReplyDeleteDisposable income is take-home pay.
Take-home pay is going to be hit hard to cover the baby boom's medicare costs, and probably their $2.6T FICA surplus since the 1% who really owe that money don't see a need to pay it back.
One edge of the Republican bargaining position is 10c of tax rises for $1 in spending cuts.
Don't get me wrong, I'm all for Federal spending cuts. I don't have kids and my mother can take care of herself, mostly.
But if they want to close the deficit by $500B, that's $450 billion of spending cuts, $2000 per capita.
Now, I don't know how that $2000 is distributed into the economy, but not all of it is flowing off to swiss bank accounts, some of it has to be salaries that support local economies all across this country.
So to that extent cutting spending is cutting redistribution, and that's the most generous Republican offer on the table.
Now (2), if Romney takes over I fully expect all this austerity jazz to go by the boards and they just let the money rip, making today's TNX off by an order of magnitude in its forecasting powers.
Dunno what happens with continued divided government. I kinda like my analogy that 2010 was "the flop" for Obama, 2012 is the turn, and 2014 will be the river, should he be still around to see it.
Troy,
ReplyDeleteRomney will do all he can to see that people like me pay no taxes. I just don't get why the average middle class American would vote for that. And yet, my mom who pulls in a Social Security check each month (and has no savings) thinks he looks presidential. Sigh.
At today's interest rates this plan would mean a retired family with $5 million in savings would pay NO income tax.
I said that in 2007. At today's interest rates, that family could easily have $10 million or more in savings without having to pay any income tax. Behold the power of falling interest rates.
Behold the power of falling interest rates.
ReplyDeletehttp://research.stlouisfed.org/fred2/graph/?g=7HV
throwing in interest rates into that chart makes a different picture of affordability.
Buying right now could be the deal of the century, or a long ride on the deflation train.
As you quoted about Weimar, there's no guarantee that strong inflation hits housing this time.
The 1970s inflation was endogenous from wages.
That situation does not obtain today.
Troy,
ReplyDeleteI've probably shared this before but...
When I was earning relatively good wages as a software engineer, I had the following rule.
In order to make a purchase, I had to think about it once for roughly every $50 it cost. It takes a lot of thinking to buy a car that way. It takes even more to buy a house.
I now think of purchases in terms of how many hours I would have to work to pay for them at minimum wage. The $50 has deflated. It takes much more thinking now.
I still haven't upgraded my computer. Still thinking I guess.
Lee Iacoca was noted for saying the only thing people look at when buying a new car is the monthly payment. I think it was he that mainstreamed leasing to boost car sales.
ReplyDeleteMaybe that will be the wave of the future... sign a 15 year lease for the TBTF's REO of your choice. It's almost the perfect duration to get 2.1 kids all through school and off to college and a second time downsizing to a condo in the city before one's date with the Medicare death panel comes up.
AllanF,
ReplyDeleteGreat idea! I'm picturing the REO ad campaign.
That's the way you want it!
Mark, I think about a new computer when the motherboard of the previous one dies.
ReplyDeleteWho Struck John,
ReplyDeleteNice. Mine's about 10 years old, lol.