Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
GDX Gold Mining Stock Fundamentals 2018 - 19th May 18
Semiconductor Stock Market Canaries: Chirp, Warble… Soon a Croak and Silence? - 19th May 18
Three Drivers of Gold Price - 18th May 18
Gold Market in First Tertile of 2018 - 18th May 18
What Happens Next When Small Cap (Russell) Leads the Stock Market - 17th May 18
Negative Signs for EUR/USD? AUD/USD - Battle - 17th May 18
DOW Jones and CRUDE Oil on a Cliff Edge, Waiting for a Nudge! - 17th May 18
Gold Price No More Subtleness – It’s Show Time! - 17th May 18
VIX Cycles Point to Stock Market Correction - 17th May 18
Trump Sounds End Times Armageddon Trumpet for Jerusalem, Israel Evangelical Prophecies - 16th May 18
Our Next Stock Market Dow Fibonacci Price Targets – Get Ready! - 16th May 18
The Coming Copper Crunch - 16th May 18
Stock Futures Are on a Sell Signal - 16th May 18
What to do When the IRS Comes for Your Property - 16th May 18
IS BITCOIN ANONYMOUS? - 16th May 18
Bitcoin Tide Might Have Turned - 15th May 18
UK Online Gambling Market Grows According to UKGC - 15th May 18
Stock Market Study: What Happens Next when Dow Goes Up 8 Days in a Row - 15th May 18
Fibonacci Price Ladder Points to Higher Stock Prices - 15th May 18
U.S. Dollar Rally Is Doomed - 14th May 18
Gloomy Scenarios for the Fed That Should Boost Precious Metals - 14th May 18
US Dollar One Reversal Too Many - 14th May 18
SPX futures are higher, but so is VIX - 14th May 18
Precious Metals and Miners NUGT – The Sleeping Giant Trade - 14th May 18
Is This The Netflix Of Cannabis? - 14th May 18
US Quest for Iran Regime Change: Will EU Sustain the Nuclear Deal - 14th May 18
Stocks Bears Last Stand - 14th May 18
Stocks Bear Markets Don’t Start when Real Interest Rates are this Low - 13th May 18
Stocks and Bonds Still Only 1 of 3 Macro Amigos to Destination - 13th May 18
Silver Forecast 2018 and Beyond, Investing for the $35+ Price Spike! - 13th May 18
Study: Breadth is Leading the Stock Market Higher. A Bullish Sign - 12th May 18
Ways on How to Get An LLC - 12th May 18
Kanye Is Right: Slavery Is A Choice And We're All Slaves Today - 12th May 18
Trump’s Iran-Decision Did-not and Won’t Affect Oil Prices - 12th May 18

Market Oracle FREE Newsletter

Trading Lessons

Key Reasons Why U.S. Housing Market is Not Coming Back: Demographics, Student Debt, No Jobs

Housing-Market / US Housing Jun 24, 2012 - 03:04 AM GMT

By: Mike_Shedlock

Housing-Market

Best Financial Markets Analysis ArticleConsumers Not Ready to Borrow Again

Ben Bernanke is trying like mad to stimulate credit and lending but to no avail. It's an uphill debt because of demographics, student debt, and lack of jobs.

Citing falling debt-service needs, some economists think consumers may be ready to go on a borrowing. They are badly mistaken.


I agree with Jed Graham on Investor's Business Daily who says falling debt-service needs is an illusion. Graham makes the case in Consumer Credit Impaired By Under-45 Job, Debt Woes.

Nearly four years after a borrowing binge gave way to financial crisis, have households slashed enough debt to take on new credit and start spending again?

Yes, says a growing chorus of economists, with some evidence to back them up. The Federal Reserve's ratio of debt service payments to disposable income is at its lowest level since 1994.

But that traditional measure is a poor guide today, as credit-hungry adults under 45 bear the brunt of the jobs, housing and student loan crises.

Considering where more of the income is coming from (government supports), who's earning a bigger share of wages (baby boomers) and which type of debt has been on the rise (student loans), re-leveraging may be a long way off.

Not Ready to Borrow

Not Ready To Borrow Again

Graham's analysis is correct. Here are some points from the article that will explain why.

Demographics

  • The number of full-time workers younger than 45 has fallen by 9 million, or more than one in seven, Labor Department data show.
  • The number of full-time workers ages 55 and older has climbed by 8.5 million.
  • The 35-44 population has shrunk by 4.5 million over the past 12 years.
  • The huge baby boomer cohort has aged while Generation X is unusually small.

Student Debt

  • Student debt has soared to nearly a trillion dollars. About two-thirds of it are held by those under 40.
  • Among those age 30-39, 25% have student loan debt, with an average balance of $28,500.
  • New York Fed research shows that of 37 million student loan borrowers last fall, only 39% were paying down their balances.

Jobs

To Graham's analysis I would add the jobs picture is bleak.

  • Unemployment insurance has expired for millions: 200,000 Lose Unemployment Benefits This Week, Nearly Half From California
  • Self-Employment desperation: 100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits
  • Last two jobs reports have been dismal: Another Payroll Disaster: Jobs +69,000, Employment Rate +.1 to 8.2%, April Jobs Revised Lower to +77,000; Long-term Unemployment +310,000
  • The 4-week moving average of weekly unemployment claims is at the highest rate of the year, at 386,250.

Those were points 7-10 in my analysis 12 Reasons US Recession Has Arrived (Or Will Shortly)

Housing

Let's put it all together and look at the picture from the point of view of housing.

  1. Kids are graduating from college deep in debt with poor job prospects.
  2. Those with too much debt and too little income are sharing apartments or moving back home, not buying homes and starting families.
  3. Boomers are looking to downsize, not buy more toys and larger houses.
  4. Shadow inventory of buyers waiting for higher prices is immense, yet generation X and Generation Y represent small pools of potential buyers

Factor in the rapidly slowing Chinese economy (China Manufacturing PMI 7-Month Low, Sharpest Decline in New Export Orders Since March 2009 coupled with Europe in the midst of a severe recession, and it's difficult if not impossible to see just where US growth will come from.

Nonetheless, I believe housing is bottoming. I made the case in New American Dream is Renting; Reflections on Renting Houses, Cars, Books, Clothes; Will Rentership Fuel the Next Boom? What About Home Prices?

However, even "if" housing is bottoming, don't expect either housing or the economy to go anywhere fast. Prospects for family formation are fundamentally very weak and overall economic fundamentals are very weak as well.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2012 Mike Shedlock, All Rights Reserved.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules