Readers suggested a topic on expectations and the housing bubble. “How can most non-rich Americans reasonably expect to live in the future? Looking at the big costs, food, housing, transportation, education for the young, health care in old age, years in retirement. If it is less than in the past, what is the reason?”
A reply, “Demographics? More old consumers, less young producers? Unfunded promises? More promised money than actual money? A debt driven economy that can no longer acquire debt? A consumer-based economy powered by consumers who are broke?”
Another added, “Is there an implied guarantee in this country that we should live as well or better than previous generations?”
One said, “I like that suggestion and I hope you don’t mind if I expand on it and ask for a discussion on when and how the portion of the 50% that have jumped a few income niches in living standards through the use of credit will realize they’ve got to start sloughing off their material items and assume the lifestyle they thought they’d left behind.”
“It’s occurred to me that the bubble has lasted long enough in duration that some of the younger set (young 30s and below) may not realize that a lot of what they think is normal is smoke and mirrors and so they’re not acknowledging how far back the system is going to correct, not to mention any overshoot.”
“But it’s really not just about that age group. I remember watching my college friends (’83) buying bigger homes, 1 year after graduation, than what their parents had built up to after 20-25 years together. Right off the bat they put all the bells and whistles in them. It kind of did work out for us 80s graduates who if they were smart stayed in one home and are having mortgage burning parties now. Well I’ll be the first to admit while they were paying down their mortgae I was dropping $50-$100 a night in the Boston dinner/bar scene. Now their kids are out of school a year and buying homes even when single. Not sure it will work out so well for them but I wouldn’t be surprised to hear their parents are explaining everything works out just fine if you take the long view.”
“I believe a lot of people who think they’re ‘rich’ will find they just rode the credit bubble up. Some were smart enough to know it was a limited gig and exited appropriately. Many grew their wealth cautiously and it is protected probably as well as anyone can through hedges. But others were caught unprepared and are too late to unload assets.”
“I’m watching this group like a hawk. Yeah, their condescension when we didn’t follow them into the maelstrom angered us. Some even accused us to our face of being jealous losers. I’d love to say to them: You had a beautiful ride but may lose what to you is ‘everything.’ We had stability. Maybe we each got exactly what we wanted.”
Another had this, “How do 2 people survive in what has now become a 3 income household? As a necessity, not for procreation. There are child-labor laws, you know.”
A reply, “Funny you would mention that; I’ve long called the HELOC trend the ‘third income,’ to try to get people to understand how out of control American finances had become. There is no fourth income, so all that expansion had to STOP. And once it stopped, then it had to crash… which the government is desperately and constantly trying to delay and cover up. This must all end, and badly.”
“Food, transportation: these are highly dependent on the cost of energy. So they will be markedly higher.”
“Housing: will continue to fall and then stagnate for a generation. Sadly, too many will have not foreseen this, due to ideology, and will not be able to afford to buy with cash despite the cheapness.”
“Education for the young: this will continue to climb since it’s essentially a middle-class drug. But eventually (maybe 15 years from now) more and more people will reject it as an unnecessary cost. Lots of Americans now are hit with what’s effectively double taxation, since they pay their local property taxes for lousy local schools, while they send their kids to private schools on their own dime.”
“Health care in old age, years in retirement: we had it too good, and the time is here to pay the price. I just had a friend die at age 87. He expired from lack of nutrition in his own home, as he wished and as his family wished. There was no real possibility to keep extending his life at the cost of losing the family home. More and more people will have to make this choice, since economically there won’t be other choices.”
From Bridge Michigan. “Thousands of Michigan home and business owners have been the recipients of hundreds of millions of dollars in property tax cuts in recent years — a savings that few seem to recognize. The impact of that tax cut has been minimized for a variety of reasons. For many taxpayers, the cut in their property tax bills and declining incomes have ‘canceled each other out,’ said Craig Thiel, director of state affairs at the Citizens Research Council of Michigan.”
“Michael LaFaive, director of fiscal policy at the Mackinac Center for Public Policy, a free market think tank, agreed. ‘It only comes because they’re poorer,’ he said. ‘That’s not a tax cut to me. That’s just a recognition that people aren’t as wealthy as they once were.’”
“Walt Sorg, a retired talk radio host and Democratic candidate for a state House seat in Lansing, said the value of his Lansing condo, which he bought in 2005, has fallen about 50 percent. His tax bill is about $1,000 a year less than when he purchased it, even with the passage of several tax hikes during that time. Most of his savings are being spent to reduce debt, he said. ‘Everybody likes a tax cut,’ Sorg said. ‘But when I dial 911, I want someone to respond. I want fire and police services and good roads. None of the cost of providing those things has gone down 50 percent.’”
“Michigan State University economist Charles Ballard said he thinks most of those not spending their tax cuts on necessities are either saving it or using it to pay down debt. ‘A large number of people are over their heads in debt,’ he said. ‘They’re funneling some of it into paying student loans or paying off credit cards. It means they’re not putting that money into buying stuff.’”
“Mike Maziasz, a General Motors retiree living in Troy, said he thinks lower property values are a bad thing, particularly for retirees who want to move to a warmer climate, but can’t sell their homes without taking big losses. ‘Is it a little easier to write the (property tax) check? Yes,’ he said. ‘Do I like having a reduction in my property value? No.’”
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Current homeowners accounted for 54 percent of October’s non-distressed market, up from 50 percent in June, according to a new survey by Campbell/Inside Mortgage Finance. This as the share of non-distressed sales surged to 64.7 percent, up from 55.7 percent as recently as February. Unfortunately, first-time home buyers are seeing just the opposite, largely left out of this surge in sales and prices. Their share of the market, usually up in the 40 percent range historically, fell to 34.7 percent in October, the lowest in the Campbell/IMF survey’s three-year history. The National Association of Realtors put their share even lower, at 31 percent. Either way, they are the only group of buyers that have not seen their share of non-distressed home purchases rise over the past five months. The mortgage of choice for these buyers, FHA-insured loans, are increasingly tough to obtain. (Read More: 
] —Jones Lang LaSalle [JLL Loading... ()