Are you better off than you were a year ago? Probably not. Since then, global markets have lost roughly half, or $30 trillion worth of their value. House prices fell 16.6% between August 2007 and August 2008 and 3.4 million people are expected to have foreclosed on their houses by the end of 2009. So you can't retire as soon as you thought and if you still own it, you can't borrow money against your house.
Looking ahead to the holiday season and witnessing thousands of people losing their jobs could put you in a bad mood. After all, median income is down since 2000 while it still costs much more to fill your gas tank than it did back then -- not to mention pay for health care. So it should come as no surprise to learn that consumer confidence is lower than it has been in the last 41 years.
But consumers are not smart. As John McCain advisor, Phil Gramm has said, Americans are whiners. And McCain himself has made it clear that the economic fundamentals are strong. After all, McCain (or more likely his wife) owns seven houses and thirteen cars. So the point is that his economic fundamentals are strong. And that's all that really matters.
As for American workers, let them eat cake.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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Reader Comments (Page 1 of 1)
10-28-2008 @ 1:45PM
Iridium said...
Housing still has to come down another 15-30% depending on the area just to get down to where the long term forecast would put the median home.
The median home price should be $175k in the middle of the country. NYC and coastal areas would of course be more.
Still you have to be a complete idiot to think that the average house could double in value over 6 years when real income dropped and think the economy would come through ok.
Just like a 401k or individual stock, value is what it sells for not what somebody said it was worth at some point in the past. We got into such a big mess because people overvalued what other people held. Not knowing any better people took this value as cash in thier pockets and went out and spent it. They didn't understand what paper value meant. You can't spend money you think you have, you can only spend money you actually have.
You can say houses have lost 17% of thier value but they really didn't. That value was never truly there, it never really existed. The true value of a house is what the average person in an area can afford. Prices still have to fall quite a bit more for that to be a reality.
See we were only able to create this housing boom by selling houses to people who couldn't afford them. Prices right now are still above the level before the boom. The housing bottom is the median price of a home in 1998. If that was $125k for the house you are trying to get $300 for you are going to be in for quite a shock when you can't unload it nomatter what you do.
10-28-2008 @ 2:24PM
Virgil Bierschwale said...
Interesting.
3.4 million homes foreclosed on.
approximately 3.4 million jobs outsourced as the last total I found on google was 2.7 million in 2007
Is that a coincidence ?
I doubt it.
We're doing this to ourselves.
Virgil
http://www.KeepAmericaAtWork.com
10-28-2008 @ 2:28PM
jan said...
How many homes John McCain's wife owns is not the issue. Many in the Democratic Party own more than one also and nothing is harped on about that. McCain meant the fundamentals of the American people were strong, not the economy and you can't twist that any way the liberal press wants to but, it doesn't make it correct. Obama owns a 1.9 million dollar house and it is suspecious on how he acquired that but, it is not even brought up and harped on by the liberal media. Everything wrong about Obama is covered up deliberately. Pelosi paid her husband out of campaign funds and many Democrats have done this also and the liberal media is covering that up to. Pelosi, Reid, Dodds, Franks, Shummer, and many others begged for this 700,000 bailout and now they are planning even billions and billions more. They will continue to waste our tax dollars like they have in the past with no accountability just like what got us into this mess to start with. We need to get rid of those crony Democrats in office before we can get this country back on the right track.