The Real Price of All Of The New Housing Development
by Bill Simon
Though Bart Brannon probably won’t believe these statistics, Georgia is now somewhere between 4th and 1st in the country in home foreclosures.
Take a look at this article from The Atlanta Business Chronicle.
How do you think the rise in home foreclosures happens? Business layoffs of the residents? Or, have they been taking out highly risky “interest-only” loans, and spent the money they would have spent on principal on frivolous bling?
Let me know what you think.
September 13th, 2006 at 12:32 pm
Bill Simon,
I would say all of the above.
September 13th, 2006 at 1:17 pm
Over a year ago I spoke before the Cherokee County Republican party about this issue.
I predicted this would happen for the following reasons:
1) Real wages are declining for 80% of Americans
2) Close to 1/3 of consumer spending comes from people re-financing their homes to keep up with declining wages
3) Close to 50% of the home loans in the Atlanta area are interest-only, compared to 33% nationally
4) A bulk of the interest-only loans will come due this year, forcing people to meet higher payments on declining real wages.
5) Banks would raise interest rates due to risk and out of control government spending
Some in the audience rudely ask why they should listen to me since I am in the debt business (ie part to the problem). This was the meeting in which Dick Hall was so out of control that the Chairman had to stop the meeting.
September 13th, 2006 at 1:44 pm
John,
Okay, you predicted this. But, how does this affect the “macro-world” of the United States? If 7,200 people lose their homes, is that enough of a loss of those people’s spending power to affect me?
September 13th, 2006 at 2:10 pm
It does not look good, because this is only the first wave of homes getting rate adjustments.
I would not want to be a new home builder or the bank behind them.
We have a tough problem the more overseas cheap slave made goods we buy, the more we hurt wages. As real wages drop the less we can buy. The more we bring in overseas cheap legal or illegal labor to compete with overseas slaves labor, the more our service cost goes up(schools,roads ,hospitals…) vs tax revanue. This is called a race to the bottom.
September 13th, 2006 at 3:30 pm
Predicting a downturn in the housing market as interest rates rise is like predicting rain while standing in the middle of a thunderstorm…big deal.
Even with the foreclosure news, Georgia still has 8 out of the 30 fastest growing counties in the U.S. Technology companies are springing up, we are expanding trade opportunities and gas prices are falling (seems you predicted the opposite on that one Konop if I remember correctly). Can’t wait to see ‘real wage’ numbers as gas gets closer to $2.00.
September 13th, 2006 at 3:51 pm
Bart,
Interest rates a year ago were not climbing that much that fast. Give John credit where credit is due.
September 13th, 2006 at 4:25 pm
Hey, Bart: it’s a pretty big deal to the folks losing their houses.
September 13th, 2006 at 4:39 pm
Bart,
You are wrong we are falling behind to China with “U.S. Technology companies”
via the trade deal with Communist China.Caroline posted this yesterday on the blog. I also was warning about this at the speach.Remember you kept saying this could never happen with China.
http://www.manufacturingnews.com/news/06/0905/art1.html
September 13th, 2006 at 6:03 pm
I would like to step in the ring here and say the foreclosure rate has stepped up over the past two years. The news is not new to anyone following the rise of interest rates by the Feds.
The rise of foreclosures has hit across the board of all incomes. The appeal of the interest only loans was high with upper income and lower income wage earners.
Alan Greenspan warned this would happen and had banks tighten rules regarding ARMS and other high risk loans.
The major building companies who are building homes in this fine county were pushing ARMS like this was the best option and advising clients in 3 years they could sell the home and move to another or get a fixed loan.
I know this since; I was looking at homes in Cherokee for the last 2 years.
I decided with rates on the rise and listening to Greenspan and seeing taxes on the rise in Cherokee and Woodstock for the last year I decided not to buy a home.
Now banks are working with the home owners to stop the increase in rates and even taking steep losses to recoup some of the money lost.
The bank I dealt with advised me not to purchase a new home or preowned home due to the tightening rules and the fact rates were on the rise. The other lenders pushing ARMS did not advise clients that an increase in property taxes at the end of the year would add $100 or more to the loan.
Yes the loss of jobs has had a great impact to the rate of foreclosures. The loss of jobs at Ford, GM, the military bases, General Pacific, Bell South, Delta and other airlines, and other companies which are expected to merge in the next couple of months or so has had a huge impact on the rate and local economies.
These homeowners who worked for those companies will have a higher foreclosure rate due to loss of a job and some took high risk loans to purchase a house.
The lesson learned here is Cherokee County will be or is already next in line. The other lesson is to read Bloomberg and publications and trade magazines. The warning signs for this were two years ago.
The effect on the economy well it can hit hard or not at all but it hits the local economy harder due to the lost revenue from the house or property.
The next lesson will be the private partnerships with Goldman and Lehman financing the roads as seen with the quarterly reports today a company who makes money on mergers and trading and then invests in roads and other insane investments only leads to trouble. That our local leaders want to lead the path in
private partnerships to help build roads and bridges and bring toll roads to help pay off these roads. Instead of investing in local companies which will bring the tax base back to the county and state
it goes to a larger corporation hell not even a local bank. One would think even the slightest investment
in ones on economy may save several jobs and lead to lower rates in
Foreclosures. So next time you see a city, county or state making deals with outside
investors just remember the people who could have these jobs could help someone keep a home by
buying a computer, a car, movie tickets, going out to eat. Our grandparents and great grandparents
are rolling in there graves as greed has turned ugly.
Kevin M Bailey
September 13th, 2006 at 6:51 pm
Bart,
BTW ,
Real wages went down for 80% of Americans before the spike in gas prices.
Just a few big ticket cost factors for Americans, Healthcare, College, Daycare,Rent…..
September 14th, 2006 at 3:55 am
Home foreclosures are a symptom, not a cause, of the problem. The problem is that Americans, as individuals and collectively, are compulsive debtors. We have lost the power of choice, thanks to unrelenting corporate propoganda, and a lack of individual backbone.
This is not to excuse or deny the immense institutional barriers the working class faces in this country. That said, if individuals do not tune out the lies being pumped out by the corporate superstructure, and TAKE RESPONSIBILITY FOR THEIR OWN LIVES, all is lost.
Rent more, shorten the commute, and shred the credit cards, people. You’ll have more money at the end of the day, I promise.
September 14th, 2006 at 8:12 am
Charley,
A big factor in the economy is consumer spending. The value of companies are based sales growth in general. The way you manage risk is a combination of price and credit underwriting. The difficult dance the fed is playing is how to tighten credit , without killing consumer spending.
You are right that people should not spend more than they make. But our economy is based on people doing that. Also that is why many companies are investing overseas, and not looking for growth here.
That is why I think you will see a correction in the stock market as well real estate. Also the debt level of consumers and Government will drive the dollar down.
The cure is back to basics.
As a Country we need to produce and sell more products than we buy.
We need to negotiate trade deals that stop promoting slave and child labor.
We need tax reform that combines a sales tax with a flat tax to stop lobbyist from manipulating the tax code with Congress for campaign contributions.
We need to have an education system that has college bound kids go in one direction, while vocational kids go in another direction.
We need kill No Child Left Behind, And have local business coordinate with local schools to meet the needs of the future work force.
We need to become energy independent , and kings of alternative energy.
We need to solve the healthcare crisis in America. This is killing industries in our country. Part of the problem is we are competing with countries that have Child and slave labor.
This is just a start.
September 14th, 2006 at 10:46 am
Bill,
You wrote, “Interest rates a year ago were not climbing that much that fast. Give John credit where credit is due.”
Matter of fact — Interest rates were in the midst of rising .25 point during every fed meeting when Konop made the prediction. 2005 saw rates rise from 2.5% to 4.25%, a very significant increase. Sorry — can’t give Konop credit for predicting rain in a rainstorm.
September 14th, 2006 at 11:04 am
Bart,
Did you or did you not pooh-pooh everything Konop said last year regarding the housing rates?
In short, don’t give me this “Oh, that was so obvious” kind of answer as if you knew what would happen and what the effect would be. After the Fed kept raising rates, the market kept swelling higher and high in development projects all over the state, and especially in the Atlanta-metro counties.
MOST people would have presumed that those developers and builders thought the rate increases could still sustain an ever-growing demand for new homes, and, in fact, fuel the development of even more new homes.
Why? Because lots of people interpret the Fed rate increases as a good sign that the economy still has a lot of room to grow.
September 14th, 2006 at 11:16 am
“I predicted this would happen for the following reasons:
1) Real wages are declining for 80% of Americans
Do you have a source for this factoid, John? According to the Census Dept., real household incomes are up over the last two years in all but one income group – the 60-80% quintile. All lower quintiles and the one higher one – or 80% of households – are realizing higher real incomes. See http://www.census.gov/prod/2006pubs/p60-231.pdf
As for hourly wages, while those of production and non-supervisory workers are essentially flat (on an inflation-adjusted basis, and likely due to a slight up-tick in inflation rather than any slowing of nominal growth) since the recession ended, they are up from 1999 and 2000 boom-time levels. See bls.gov.
2) Close to 1/3 of consumer spending comes from people re-financing their homes to keep up with declining wages
Consumer spending accounts for some 71% of GDP, John, or some $9.2 trillion currently. Can you explain just what you are referring to when you say “1/3 of consumer spending comes from people re-financing their homes”?
3) Close to 50% of the home loans in the Atlanta area are interest-only, compared to 33% nationally
4) A bulk of the interest-only loans will come due this year, forcing people to meet higher payments on declining real wages.
I’ve been wondering how anyone can afford all these million dollar houses being built around here, but can you substantiate this factoid #3? I seriously doubt it. Perhaps you meant 50% of originations over some relatively short period, but if you expect anyone to believe “close to 50%” of outstanding home mortages in the Atlanta area are interest-only, you’re going to have to cite a source.
As for #4, I think you meant to say the interest rates will reset. To “come due” means they will mature and be payable in full.
More generally, while debt burdens really are higher than at any time before (for which data is available), the over all figures are not significantly changed since 2001. Interestingly, renters are in the best shape they’ve been since 1993 in terms of their total “financial obligations” (rent, all debt payments, auto lease payments) to disposable income. Financial obligations now absorb 24.3% as opposed to 31% in 2001. Seems the renting classes are getting out of debt.
Homeowners, however, are facing higher debt burdens due to mortgage payments (including taxes and insurance) now exceeding 11% of disposable income versus a peak of 10.4% in 1991 and a trough of 9% during the last boom. Offsetting that somewhat is a half percent decline in consumer credit obligations, but the homeowner total is still up about a point and a half since 2001. See http://www.federalreserve.gov/releases/housedebt/default.htm
Of course, whether any of that spells doom for the economy is highly debateable. What is not debateable, however, is whether you can lay blame for homeowner debt burdens on China, trade in general, or immigration. Median household incomes are rising, not falling (see the Census report linked above), so the ratios are not higher because incomes are lower. And trade makes what we consume cheaper, not more expensive, so we are left with more to spend on such things as housing because our cars, clothes and electronics are more affordable. If the housing and mortgage industries have been too loose in extending credit and the result is that some people bought more house than they should have, the industry and those buyers will pay the price of their irresponsibility, but IMO it will be no economic disaster.
September 14th, 2006 at 11:58 am
Bill,
Bart forgets what I said about Prime in the meeting.
In the boom time for interest-only loans the prime rate went from 4% to now around 8%. So this is a bigger factor in what consumers pay for money.
Prime was growing faster than Fed rates as a % to cover the risk of the loans.This is why I knew as the loans come due that many consumers would not have the money for the new payment. That is why we are only seeing the start of a big problem.
The way this was coverd up was people rolling the home value increase into the new loan. If home values go flat to down and real wages are dropping, this is a tough problem. When I made that point in the meeting Dick Hall’s crew got rude about the fact I am in the credit business, how dare I even say anything. Once again we had over a 100 people who saw what happen.
September 14th, 2006 at 2:22 pm
Sandy Springer,
First,
You are right the rent rate is better than buying now. Which tells you the housing market is overpriced via ROI. I said this to Bill yesterday, that rents will likely go up relative to housing value. I think when values settle it will be a good buying market. Which is good if you have cash or credit to leverage.
Second,
I said real wages not household income. Wages have been flat, while the cost of living has gone up. The study you cite shows that the only increase in household income is due to more in the family working. Also the net increase will not cover the increase in money cost for many.
Also healthcare,childcare,college cost,energy are all growing at 2 to 4 times faster than wages. And if your re-adjusted home loan payment from 3 to 5 years goes up the rate of prime 4% you got a problem. In real world if you have 200k loan that means your house payment went up by around $670 a month. That does not include credit cards…….
Third,
The reason many took on the debt was thinking wages would grow with payment increase. You agree wages are flat, since post NAFTA , China WTO…. Also the savings rates went down by 11% post the trade deals for average American family. My question is simple. You know between China and India they have over 3 billion people willing to work for slave wages. If we have only 300 million Americans via supply and demand when do wages go up again?
Also factor in we are falling behind on high tech to China.
http://www.manufacturingnews.com/news/06/0905/art1.html
http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=55383
http://www.deloitte.com/dtt/article/0,1002,sid%253D1000%2526cid%253D123922,00.html
BTW, this is from Financial times article Real Wages Fall at Fastest Rate in 14 Years
by Christopher Swann in Washington
“There is still little evidence that workers are gaining much traction in their negotiations,’ said Paul Ashworth, US analyst at Capital Economics, the consultancy. ‘If this does not pick up, it raises the prospect of a sharper slowdown in consumer spending than we have been expecting.’
Economists are divided over the best source for measuring pay increases in the US, since the government releases three main measures. A gauge of average hourly earnings is released with the employment report. This rose by 0.3 per cent in both March and April and 0.1 per cent in February. Even with a slight rise in the hours employees are working, from 33.7 to 33.9, this suggests wages are struggling to keep pace with inflation. The gauge covers non-supervisory workers, about 80 per cent of the workforce.”
If you want more sources just ask.
September 14th, 2006 at 2:56 pm
No John, I didn’t forget, just didn’t pay attention as I was waiting for the sky to fall.
So far you have been wrong, but if like other doom and gloomers you continue to predict bad things, eventually you may be able to say I told you so. Kind of like sports guys predicting year after year the Braves would not win the division…now after 14 long years they can claim Nostradamus like status when it comes to sports prognosticating.
September 14th, 2006 at 3:13 pm
Sandy,
This study is the latest I saw on consumer spending and housing.
By Dr. Carl Steidtman, Chief Retail Analyst, Deloitte Research
The Housing Market as Consumer ATM
Over the past three years, low mortgage rates have allowed the housing market to operate much like an ATM for consumers. The rising value of homes coupled with low interest rates and an aggressive refinancing industry has made it easy for consumers to tap into the equity in their homes.
In recent years, money coming from mortgage refinancing accounted for as much as 60 percent of the increase in consumer spending. Even a small reduction in the flow of cash pouring out of home equity will put a squeeze on consumer spending.
http://www.gourmetretailer.com/gourmetretailer/magazine/article_display.jsp?vnu_content_id=1002276789
September 14th, 2006 at 4:04 pm
Sandy and Bart,
This is a study on how healthcare cost is out of control at the same time the house payments are going up.
http://news.yahoo.com/s/nm/20060914/us_nm/insurance_study_dc
September 14th, 2006 at 4:37 pm
Bart,
You said “U.S. Technology companies are springing up, we are expanding trade opportunities”
We had a record trade debt this month and we are getting killed by China in the technology sector in trade.And we all know how housing is doing. Do you have hot air as usual or some facts.
September 14th, 2006 at 7:11 pm
“You are right the rent rate is better than buying now. Which tells you the housing market is overpriced via ROI.”
I said no such thing.
“I said real wages not household income. Wages have been flat, while the cost of living has gone up.”
Actually, you said “real wages are declining for 80% of Americans”, which is absolutely untrue.
“You agree wages are flat, since post NAFTA , China WTO……”
I most certainly do not agree. In fact, in the 12 3/4 years since NAFTA went into effect, real wages for US workers are up 8.4% and real median household incomes are up 10.2%. And since the WTO was created about a year later, the gains since its inception are similarly large.
As for energy prices, pump prices for gasoline are down over 20% in the last couple of weeks, spot market gasoline prices are down by a third in six weeks and are back to pre-Katrina levels, and spot prices for natural gas are down by almost 2/3 in the last year – a drop that should positively impact our wallets come winter.
But let’s not let little annoyances like facts get in the way of a good story. Everything’s going to hell, dammit!
September 14th, 2006 at 7:23 pm
Sandy Springer,
I must admit I like the way you follow the market and know the spot prices. You also know the natural gas price fell below $5.00 for the first time in two years.
I would love to know if you know the interest rate for a house today compared to last year and the ARM rate.
If so wow to bad we never met.
I think John was right in some of his comments but had the figures off slightly. If you take the number of people who have ARMS and Interest only loans %50 of those are in danger of foreclosure. Those numbers came from the MBA. I must admit I do like your figures glad to see I am not the only who follow the market.
September 14th, 2006 at 7:24 pm
Sandy Springer,
I do know the rates but would love it if you did if so you have kept up with the market.
September 14th, 2006 at 7:58 pm
Sandy,
Real wages are down read it for yourself.
BTW, this is from Financial times article Real Wages Fall at Fastest Rate in 14 Years
by Christopher Swann in Washington
“There is still little evidence that workers are gaining much traction in their negotiations,’ said Paul Ashworth, US analyst at Capital Economics, the consultancy. ‘If this does not pick up, it raises the prospect of a sharper slowdown in consumer spending than we have been expecting.’
Economists are divided over the best source for measuring pay increases in the US, since the government releases three main measures. A gauge of average hourly earnings is released with the employment report. This rose by 0.3 per cent in both March and April and 0.1 per cent in February. Even with a slight rise in the hours employees are working, from 33.7 to 33.9, this suggests wages are struggling to keep pace with inflation. The gauge covers non-supervisory workers, about 80 per cent of the workforce.â€
As far as wages you are not saying that the cost of living in close to 13 years has only gone up 8%.
Healthcare, housing, college , daycare.. all up 200% to 400% in the last 13 years.
How would real wages not be down ?
September 14th, 2006 at 8:50 pm
Sandy,
This is from the Washington Times,Washington POST, New York times. All say real wages are down !!!!
Fastest Decline in Real Wages on Record
Inflation Up; Wages Down
By JARED BERNSTEIN
Employers’ wage costs grew 2.3% over the past year, the slowest growth rate on record, according to today’s report from the Bureau of Labor Statistics. Factoring in the recent energy-driven increase in inflation, the real wage is down 2.3%, also the largest real loss on record for this series that began in 1981
Real Wages Fail to Match a Rise in Productivity
By STEVEN GREENHOUSE and DAVID LEONHARDT
Published: August 28, 2006
Wages and salaries now make up the lowest share of the nation’s economy since the U.S. began recording the data in 1947
http://www.nytimes.com/2006/08/28/business/28wages.html?ei=5089&en=ea4fc646527e4520&ex=1314417600&partner=rssyahoo&emc=rss&pagewanted=print
According to the Washington Post business news: “After adjusting for inflation, average weekly earnings for private production and non-managerial employees … bought 0.5 percent less last month than they did in July 2004, after taking price increases into account. These workers make up 80 percent of the labor force.”
According to a Washington Times editorial, “The fact that the U.S. economy has generated a negative growth rate over five years for real average weekly earnings of 80 percent of its workforce should be a concern shared by all people, regardless of political orientation.”
And according to a new New York Times book, “Class in America,” “For most workers, the only time in the last three decades when the rise in hourly pay beat inflation was during the speculative bubble of the ’90s.”
September 14th, 2006 at 11:05 pm
“As far as wages you are not saying that the cost of living in close to 13 years has only gone up 8%.”
Do you really not understand what the term “real wages” means?
And why are you quoting – for the second time – and article headlined “Real Wages Fall at Fastest Rate in 14 Years” with a passage that says real wages rose three straight months? Do you not realize that the headline and the quoted passage contradict one another?
“Healthcare, housing, college , daycare.. all up 200% to 400% in the last 13 years.”
Sorry, wrong again. According to BEA figures, medical care prices (including insurance) are up 51% or 3.2% p.a. in the last 13 years, energy prices are up 98% or 5.4% p.a., housing prices are up 47% or 3.0% p.a., and higher education prices are up 83% or 4.8% p.a. Faster rise than most other prices, but not remotely close to “200% to 400%”.
Meanwhile, many other prices on significant consumption categories are actually down over the last 13 years.
Oh, you might be interested in knowing that wages and weekly earnings are not interchangeable statistics. Nevertheless, we can make the jump if you wish.
According to the BLS, average weekly earnings of production workers rose 8.3% from July 2004 to July 2006. Meanwhile, consumer prices rose only 7.4%. You didn’t give a link for your WaPo article, so I can’t tell what month’s data they were reporting, but if it was this July, they are simply wrong.
Now, looking back five years, average weekly earnings are up 14.9% while prices are up 14.6%, so your WashTimes – also undated and uncited – appears to be erroneous as well.
Finally, focusing on just the latest year, average weekly earnings rose 5.5% while prices rose only 4.1%.
See http://www.bls.gov.
September 14th, 2006 at 11:07 pm
Kevin Bailey Says:
“I do know the rates but would love it if you did if so you have kept up with the market.”
Kevin, I don’t understand your question. Could you clarify?
Thx.
September 15th, 2006 at 4:49 am
Sandy Springer,
I was asking if you knew the 30 year rate and 15 year rate. If you knew the 1 year ARM and 5 year ARM. I had seen the new rates on Thurs which keep falling but I think you know them since you keep up with the market.
September 15th, 2006 at 6:10 am
Sandy,
Source CNN money,
Although real household income was up, wages and salaries lost ground. Wages for men fell 1.8 percent to $41,386; wages for women fell 1.3 percent to $31,858.
The difference between rising household income and falling wages and salaries may be traced to two factors, according to David S. Johnson, the chief of the Census Bureau’s Housing and Household Economic Statistics Division: Household income can include other sources of income, such as from stock dividends. And some households may have added low-income workers – they would raise the income of the household, but at the same time bring down the median wage
Digging more deeply into the data, one finds that all the income gains went to householders aged 65 or older, most of whom are retirees and no longer part of the work force. Their median household income gained 2.8 percent.
In contrast, median income of non-elderly households, working people, fell 0.5 percent. “The recovery is bypassing working families,” says Bernstein
http://money.cnn.com/2006/08/29/real_estate/wealthiest_American_cities/index.htm
http://www.theoaklandpress.com/stories/090406/loc_2006090438.shtml
http://www.statesman.com/news/content/news/stories/local/09/04/4census.html
http://www.washtimes.com/op-ed/20060830-085524-5323r.htm
September 15th, 2006 at 7:03 am
Sandy,
This is just from 2000 to 2004 the increase in healthcare cost to workers in America.
The average employee contribution to company-provided health insurance has increased more than 143 percent since 2000. Average out-of-pocket costs for deductibles, co-payments for medications, and co-insurance for physician and hospital visits rose 115 percent during the same period (7).
According to the Kaiser Family Foundation and the Health Research and Educational Trust, premiums for employer-sponsored health insurance in the United States have been rising five times faster on average than workers’ earnings since 2000 (3).
http://www.nchc.org/facts/cost.shtml
September 15th, 2006 at 7:43 am
Sandy ,
As you see healthcare is rising 5 times faster than wages. That would be a 500% increase in real dollars !!!!!
September 15th, 2006 at 6:41 pm
Bill Simon,
Can you give John and Bart a place on your page to battle things out. Name it the NAFTA room.
September 15th, 2006 at 9:38 pm
“As you see healthcare is rising 5 times faster than wages. That would be a 500% increase in real dollars !!!!!”
John, a rise in health care spending and in health care prices are not the same thing. Spending is a function of the quantity of services provided and the price of those services. From 2000 thru 2005, for example, the medical care component of GDP rose by some 46% or 7.8% p.a. That increase, however, is the result of an 18% rise in prices (3.4% p.a.) and a 23% increase in services (4.2% p.a.).
Focusing now just on prices, it is true that health insurance premiums have been rising much faster than general inflation, but looking only at insurance premiums is misleading. From 2000 thru 2005, insurance premiums for medical care and hospitalization (as opposed to workers comp and disability) have risen by 39% or 6.8% p.a., but insurance premiums (including workers comp and disability) account for only $142 billion out of total medical care consumption of $1.49 trillion or less than 10%. So to equate a rise in insurance premiums to a rise in healthcare costs, as you have done, is factually incorrect. Prices on medical services other than insurance have risen much more slowly.
Lastly, focusing on only a few select categories of spending where prices have risen faster than general inflation and wages, and claiming that as proof that workers are substantially worse off is bogus argument. Medical care, even at $1.49 trillion in 2005, still accounts for only 17% of the $8.74 trillion of personal consumption expenditures last year. And energy only accounts for another 3.5%.
__________________________
To Kevin, here’s a great source for current mortgage rates: http://www.bankrate.com/brm/rate/mtgRsearch_product.asp?params=165000,GA,24
September 15th, 2006 at 9:40 pm
Kevin,
I would think you would care about real wages going down for hard working Americans, while healthcare,childcare,energy cost, college cost.. are all growing 2 to 4 faster than wages.
September 15th, 2006 at 9:55 pm
Sandy,
You think healthcare went up only “18% in prices” from 200 to 2005. What Country are you living in?
Did you read the NCHC report ?
The Impact of Rising Health Care Costs
National surveys show that the primary reason people are uninsured is the high cost of health insurance coverage (9).
Economists have found that rising health care costs correlate to drops in health insurance coverage (10).
Nearly one-quarter (23 percent) of the uninsured reported changing their way of life significantly in order to pay medical bills (10).
Almost 50 percent of the American public say they are very worried about having to pay more for their health care or health insurance, while 42 percent report they are very worried about not being able to afford health care services (11).
A recent study by Harvard University researchers found that the average out-of-pocket medical debt for those who filed for bankruptcy was $12,000. The study noted that 68 percent of those who filed for bankruptcy had health insurance. In addition, the study found that 50 percent of all bankruptcy filings were partly the result of medical expenses (12). Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem.
One half of workers in the lowest-compensation jobs and one-half of workers in mid-range-compensation jobs either had problems with medical bills in a 12-month period or were paying off accrued debt. One-quarter of workers in higher-compensated positions also reported problems with medical bills or were paying off accrued debt (13).
If one member of a family is uninsured and has an accident, a hospital stay, or a costly medical treatment, the resulting medical bills can affect the economic stability of the whole family (14).
A new survey shows that more than 25 percent said that housing problems resulted from medical debt, including the inability to make rent or mortgage payments and the development of bad credit ratings (15).
A survey of Iowa consumers found that in order to cope with rising health insurance costs, 86 percent said they had cut back on how much they could save, and 44 percent said that they have cut back on food and heating expenses (16).
Retiring elderly couples will need $200,000 in savings just to pay for the most basic medical coverage (17). Many experts believe that this figure is conservative and that $300,000 may be a more realistic number.
September 15th, 2006 at 10:13 pm
None of which speaks to the question of inflation. Have a nice weekend.
September 15th, 2006 at 10:21 pm
Sandy,
You also have a nice weekend. You might want to read this from the Washington Times it help answer your question on real wages falling.
Interestingly, despite the fact that the overall median household income level increased by more than $500 in 2005, it actually declined by $275 to $52,287 for the 90.9 million households under the age of 65. For the 23.5 million households 65 years and older, real median income increased by $700 to $26,036. Given that the vast majority of the nation’s working population comes from households under the age of 65, there was little comfort in the fact that their median income declined yet again. Moreover, after converting 2001 income data into 2005 dollars, the Center on Budget and Policy Priorities, a liberal-leaning think tank, found that the real median income level for households under the age of 65 has declined by a hefty $2,000 since 2001, falling from $54,287 in 2001 to $52,287 last year. In other words, while the overall median income level in 2005 was less than $250 below its 2001 level, the median income level for working-age households had fallen more than eight times as much.
One recent trend revealed by the Census Bureau report that is particularly disturbing involves real median earnings of full-time, year-round workers. For men, they have declined significantly for two years in a row. Real median earnings for full-time, year-round working women have fallen three years in a row, accelerating in their descent each year. After falling by $998 (2.3 percent) in 2004, the real median earnings of men working full-time throughout the year fell another $774 (1.8 percent) last year. After declining by $181 (0.6 percent) in 2003 and by $320 (1 percent) in 2004, female year-round, full-time workers saw their real median earnings fall by another $427 (1.3 percent) last year. Full-time female workers in 2005 had real median earnings of $31,858, down 2.8 percent ($928) from 2002. Full-time male workers had real median earnings of $41,386 in 2005, down 4.1 percent ($1,772) in just two years.
Over the last four years, the generally declining median household income levels are especially worrisome because their negative trend is quite different from previous economic expansions. In the fourth full year (1995) following the end of the 1990-91 recession, real median household income was 2.9 percent higher than its 1991 level. In the fourth full year (1986) following the 1981-82 recession, real median household income was 8.3 percent higher than its 1982 level. Now, in the fourth full year (2005) following the 2001 recession, real median household income is 0.5 percent below its 2001 level. Also worth noting is the fact that real median household income increased by 10 percent ($4,325) over the four-year period (1996-99) that ended at the peak level ($47,671) of real median household income. In 2005, six years later, median household income was still nearly 3 percent ($1,345, or $112 per month) below this peak. And the real median earnings of full-time workers have been plunging in recent years.
These income figures and trends go a long way in explaining why a sizable majority of the public has disapproved of the way President Bush has handled the economy despite its relatively low unemployment rate and modest growth rate.
http://www.washtimes.com/op-ed/20060830-085524-5323r.htm
September 16th, 2006 at 1:37 am
John,
Yes I care about the real wages and I haved followed the market for the past 5 years. I have seen the PPI and CPI grow and the GDP shrink and I have seen a third world GDP grow faster then USA. I have seen analyst for brokers downgrade stocks since they did not fire enough workers and close factories to meet what they feel is needed. I have dealt with Blue Cross due to my Chrons and fought for everything thing I have to get them to pay for test when Juan can get it free.
I have seen the labor reports weekly and just shake my head this is it part of why I am running for House Rep.
September 16th, 2006 at 7:02 am
John,
Here’s an article that you might be interested in:
http://www.businessweek.com/magazine/content/06_39/b4002001.htm?chan=top+news_top+news+index_businessweek+exclusives
September 16th, 2006 at 7:50 am
Caroline,
Great find. The problem is real basic. You have to make and sell more things then you buy ie trade debt. The cost of money will keep going up for the average American due to the borrow and spend economy driven by overseas imports not us exporting.
If we were selling heathcare to the world this would be good. The problem is we are spending domestic money that is from IOU’s to Countries like China for this job growth. We are than passing the bill on to our kids. This is a race to the bottom.
This a great point from Business Week.
Make no mistake, though:
The U.S. could eventually pay a big economic price for all these jobs. Ballooning government spending on health care is a major reason why Washington is running an enormous budget deficit, since federal outlays for health care totaled more than $600 billion in 2005, or roughly one quarter of the whole federal budget. Rising prices for medical care are making it harder for the average American to afford health insurance, leaving 47 million uninsured.
Moreover, as the high cost of health care lowers the competitiveness of U.S. corporations, it may accelerate the outflow of jobs in a self-reinforcing cycle. In fact, one explanation for the huge U.S. trade deficit is that the country is borrowing from overseas to fund creation of health-care jobs.
There’s another enormous long-term problem: If current trends continue, 30% to 40% of all new jobs created over the next 25 years will be in health care. That sort of lopsided job creation is not the blueprint for a well-functioning economy. One solution would be to make health care less labor-intensive by investing a lot more in information technology. “Low productivity in health is mostly a product of low investment,” says Harvard University economist Dale Jorgenson
September 20th, 2006 at 1:18 pm
Bart,
After attacking Mary Wilhite for not being a “real Republican” is it true you just went to work for Ben Elliott ?
What does that make you, a Lady of the Evening…
http://www.ledgernews.com/top%20stories.html
September 20th, 2006 at 5:35 pm
It is odd how that happened John.
September 23rd, 2006 at 10:44 am
Bill,
Regulator: Fannie Mae, Freddie Mac loan losses may worsen
Bloomberg News
Published on: 09/23/06
Fannie Mae and Freddie Mac, the biggest sources of money for U.S. home loans, may face higher losses from delinquencies as they buy a larger proportion of adjustable-rate mortgages, their federal regulator said Friday.
The companies’ “increased investment in ARMs and untested nontraditional mortgages may expose them to higher levels of credit losses in the future,” the Office of Federal Housing Enterprise Oversight said in a report.
Fannie Mae and Freddie Mac said this year they will expand their purchase of ARMs in response to home buyers’ preference for options other than the fixed-rate loans the two government-chartered companies typically buy. More than 80 percent of the loans backing the bonds sold by Washington-based Fannie Mae and McLean, Va.-based Freddie Mac have fixed rates.
Industrywide, ARMs expanded to 30 percent of new mortgages last year from 17 percent in 2002, data from the Mortgage Bankers Association show.
OFHEO said the delinquency rates at Fannie Mae and Freddie Mac “remain relatively low.” Still, “as interest rates rise, all else equal, the cash needs of ARM borrowers will increase as will the likelihood that those borrowers will not be able to make the higher payments.”
The delinquency rate for prime ARMs in the second quarter rose to 2.7 percent from 2.4 percent in the first quarter, while the rate for subprime ARMs increased to 12.45 percent from 12.02 percent, according to a Mortgage Bankers Association survey released Sept. 13.