Good discussion on factors undermining US stability and strength…
University of Southern California Professor of Law Ed Kleinbard and Bloomberg View Editor Paula Dwyer discuss inequality and poverty in the U.S. Here is a direct video link.
With a national average home price of 416K (compared the US average of 250K), 5.3X the average household income of $78K, Canada has the distinction of being one of the top 3 least affordable realty markets in the world today. And worse than the US was at the peak of its bubble in 2006, before US prices plunged an average of 35% and more than 50% in some of the ‘hottest’ areas like Phoenix and Vegas.
See this link for slideshow of Top 10 most unaffordable housing markets in the world.
In simple terms the Canadian housing bubble is understandable. A major commodities producer, we were riding high on global sales and thought we were invincible until the commodities boom collapsed in 2008. Since then Canadian governments, banks and households continued on the “spend/lend it and growth will come” theory. Now Canada has the highest debt levels in decades as global demand has continued to weaken.
With oil now trading below the prices assumed in most optimistic budgets, the nation comes into what is likely a prolonged demand decline, sorely unprepared. Old lessons will be learned the hard way once more.
One of the most useful strategies for rebuilding financial strength and savings in households is the choice to avoid or pay down debt while renting and taking public transit. Turn key rentals and a bus pass are increasingly being chosen over a mortgage, property upkeep and a car loan/lease. Perhaps forced by necessity, but this is a rational, secular shift in both younger and older under-saved people who are facing the realities of income stagnation and over-priced housing costs.
A behavioral change to more frugal habits and less spending is part of the critical rebuilding of household wealth which is so needed for future stability. It also means less demand and sales today. Now that ‘financial engineering’ gimmicks have run their reckless course, it is time for self-discipline, and fiscal restraint to come back into vogue. What is good for people and families will be bad for financial firms and companies banking on levered sales. But then they had their glory days getting the world into the present mess. Payback time is long overdue.
U.S. home ownership is at its lowest level since the start of 1995. Here is a direct video link.
Cory’s Chart Corner
