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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Larry Brubaker who wrote (82867)	6/21/2002 2:04:50 PM
From: Earlie	Respond to of 99280

Larry: The Fed figure you quote is household debt burden, which is composed of TWO things..... estimated mortgage cost plus all additional consumer debt. In my commentary, I made reference only to the mortgage cost. When you quote the Fed figure to suggest that mortgage cost have not gone up, it is a red herring. That is why I listed the various forms of consumer debt and their current trends.... to illustrate why the fed figure doesn't apply. Here are a few items that might be of additional interest with respect to the household mortgage debt (from a variety of sources): - in 2001, one in ten houses were priced at $1,000,000 or more. Obscene..... and they are selling. Compare that with three years ago (or go back to the fifties and early sixties when the the median U.S house price was well under $20,000). Obviously, home mortgages have experienced an even LARGER percentage rise (as a greater percentage of a home is now financed through a mortgage), whether measured in actual dollars, percent of total value of the house and percent of purchaser income. A simple question..... have household incomes experienced anywhere near such a massive, order of magnitude increase? If not, then...... - U.S. cumulative housing now worth $12.0 trillion. In the last two years, it is up $2.o tillion or 20%. Most of that increase in value has been financed through mortgages. Has the U.S. family income gone up a similar amount in that period? If not, what does this say about the idea that there has been no increase in the amount of family income devoted to mortgage payments? - The default rate on mortgages insured by the FHA is now at 4.65% and as highas 10% in some areas. And that organization is worried about this. - Many U.S. families are now paying between 35% and 50 % of total income on mortgages. Compare this number with the norm of three to five years ago. Also compare it with what banks used to feel was the "upper limit" on what they were comfortable with. (now, the banks don't have to worry because they dump the mortgages to Fannie and Freddie or directly into securitizations). - the ratio of total home real estate value to total disposable (after tax) family income is now at 1.62 .... not including interest costs! Again, make the comparison with a few years ago. Best, Earlie