Best of the Week
Most Popular
1.The Greatest Stock Market Crash Of Your Life Is Just Ahead… – Warns Harry Dent - GoldCore
2.Budget 2016: Borrowing, Lifetime ISA, House Prices, Economy, Syria, Brexit and Stocks - Nadeem_Walayat
3.Gold Price Intermediate Top - Clive_Maund
4.Brussels Terror Attacks, Death of the European Union, BrExit Wake up Call - Nadeem_Walayat
5.Stock Market Maybe This Time is Different? - Tony_Caldaro
6.UK House Asking Prices Break Above £300k! Housing Market Paralysis - Nadeem_Walayat
7.A Big Reason Why Silver Price Is Set To Soar - Hubert_Moolman
8.The Financial Crisis Has Just Begun; Is The American Dream Is Over? - Chris_Vermeulen
9.Gold Stocks Spring Rally - Zeal_LLC
10.GLX, GLDX, Baby Gold Bull Market Stillborn? - Rambus_Chartology
Last 7 days
Silver: The “Five Year Plan” and the Great Leap Forward - 28th Apr 16
Michael Hudson: The Wall Street Economy Has Taken Over The Economy and Is Draining It! - 28th Apr 16
AUD/USD - Trend Reversal or Just a Bigger Pullback? - 28th Apr 16
A Gold Revaluation Could Transform Your Financial Status - Overnight - 28th Apr 16
Monetary Policies Misunderstood - 28th Apr 16
Gold Bullion vs Gold Miners - 28th Apr 16
OECD Suggests BrExit Would Cut Net Migration by 1.2 Million by 2030 - 28th Apr 16
MP Naz Shah Punished for Tweets Made During Israel's Genocide of Gaza Palestinian People - 28th Apr 16
Global Recession in 2016 and Beyond - The Obvious Evidence - 27th Apr 16
Why Gold Bugs Need to Stop Listening to The Fear Mongers and Start Thinking for a Change - 27th Apr 16
BlackRock’s Fink: Fed to Raise Interest Rates by Quarter Point ‘at Best’ - 27th Apr 16
Gold More Productive Than Cash?! - 27th Apr 16
Donald Trump Will Fire Janet Yellen and Be Trapped - 27th Apr 16
Money Saving Gardening by Propagating Roses From Cuttings - Propagating Rose Plants Over 2.5 Years - 27th Apr 16
Facebook Censors Pro Trump and Negative Hillary News - 27th Apr 16
This is the Era of the Democrats and Your Taxes are Going Up - 27th Apr 16
Long Awaited Gold Price Breakout - 26th Apr 16
Crude Oil Price Double Top or Further Rally? - 26th Apr 16
Madness in the Crimex Gold and Silver Trading Pits - 26th Apr 16
Britain's Prospects: GBP and BREXIT - MAP Wave Analysis - 26th Apr 16
CRB, Gold, Oil, Cotton, Coffee - 7 Must See Commodities Charts - 26th Apr 16
Gold Price Target is $3,000 and Silver is $75 per Ounce - 25th Apr 16
Parameters for a Stock Market Sell Signal-in-the-making - 25th Apr 16
Stock Market Dangerous Divergence - 25th Apr 16
Gold Miners Nub is the Sweat of the Sun - 24th Apr 16
US Dollar Price Forecast - 24th Apr 16
Stock Market Upside Objective Reached - 24th Apr 16
Why Leftist Greeks have more reasons than Liberals to favour Entrepreneurship and Support Entrepreneurs - 24th Apr 16
The Dow Jones is a Catalyst for Misplaced Stock Market Optimism - 24th Apr 16
Why Russia Harasses U.S. Aircraft and Ships - 24th Apr 16
Stocks Bull or Bear Market Rally? - 23rd Apr 16
A Bright Future for Solar Power in the Middle East - 23rd Apr 16
Silver Commitments of Traders – Halloween is Arriving Early This Year - 23rd Apr 16
Good News, Bad News, Both Favor Gold And Silver - 23rd Apr 16
Mish's Sure Fire Proposal to End Japanese Deflation - 23rd Apr 16
Mish Shedlock: “EXCUSE ME MR. PRESIDENT, IS THAT A JOKE?” - 23rd Apr 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Catching a Falling Financial Knife

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.


© 2005-2016 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

Catching a Falling Financial Knife