HousingPANIC - The Housing Bubble Blog with an Attitude Problem, 2005 - 2008: A picture is worth 1000 words

November 13, 2006

A picture is worth 1000 words - The out of control American consumer

38 comments:

squidly77 said...: and who makes the profit; November 14, 2006 4:36 AM
Anonymous said...: I'll play devil's advocate here.

For all of the charts and graphs plus the dooms day blogging on this forum I still on a daily basis see people doing well. There are new cars running the streets and sales of liesure based goods like iPods are strong. People are still flying and taking vacations.

So what if they are in debt? That is the American way for a majority of the people.

And don't tell me it will just crash and there will be blood in the streets. We've been hearing that for at least 4 years since oil and natural gas prices surged. It never occured.; November 14, 2006 5:00 AM
Anonymous said...: "And don't tell me it will just crash and there will be blood in the streets."

There already is! I agree that not everyone suffers but some people do. Us internet folks who have time to be on this blog probably have better habits and more money than those who don't pop in...; November 14, 2006 5:13 AM
squidly77 said...: and who makes the money from the interest (usery); November 14, 2006 5:15 AM
squidly77 said...: your country is in bad shape(silent invasion); November 14, 2006 5:25 AM
foxwoodlief said...: First the population from 1980 to 2006 has grown so the proportion of people in hock grows, but beyond the fact that the richest have gotten way richer and corporations have record profits, there still is a lot of money out there.

On the news tonight they were featuring the explosion of multimillion dollar homes in Austin. Apparently in 1998 there were only two and now thousands and they said that there were at least 2,000 individuals with a net worth of 100,000,000 or more living in Austin and growing. After living here for six months and driving all over this town I have to say that inspite of national averages and local average prices for homes there is a significant number of homes in this town that are priced over $400k and even if they say that home prices here are below the national average I can say that at those quoted prices most people wouldn't want to live in the neighborhoods or those homes. I'm also surprised at how many people here who do own homes priced below $250,000 defer maintenance and many don't even take care of their yards.

Still, every where I go and every where I travel there seems to be a lot of money floating around.; November 14, 2006 6:42 AM
Anonymous said...: I swear my wives vias/mastercard debt must be at least 5% of our national debt. Women with charge cards are the real weapons of mass destuction!; November 14, 2006 7:17 AM
Anonymous said...: Somebody famous cautioned against doubting the resiliency of the American consumer. I think this statement will continue to hold true as long as we live in a free society.

Who do you think will jeopordize that freedom?

Salt Lake Mortgage Blog; November 14, 2006 7:19 AM
Anonymous said...: anon 5:00

Last time I checked, There were
no 300 percent increase in population from 1980 to 2005.
According to first chart US
bankruptcy increased from 300K
to 2100K.
Sooner or later someone has to pay; November 14, 2006 7:41 AM
Anonymous said...: How new debt much can the consumer take on to keep the economy going?

How are they going to clear the credit card balances now that home values are starting to drop and end the Heloc refi's?

How much reduced spending by consumers before the recession gets spiraling down and self reinforcing with layoffs, etc?

Got Debt?; November 14, 2006 7:49 AM
Anonymous said...: Well, I do not know if home prices are good as far as an indicator of how much money is floating around.

I've been to Austin many times and seen how much money is in that town. Houston (my hometown) is poor in comparison to Austin but the thing is home prices here have been jacked based on TOTAL BS.

My family bought a 3.2.2 1900 sqft house back in 1997 in an area built in the 50s that was where the well to do lived until the mid 70s when boondock developments started becoming popular. We still have people with PhDs and medical professionals in this area and some yuppies are moving in with manicured lawns, fresh driveways, and an Audi parked outside.

Anyway, the median price was around 90 grand in 1997 here. The house next door to mine sold for $192K 2 years ago. This is very odd because historically this area has been for people who manage to have stay home moms and still live well as in drive a good car that is a few years old and keep up maitaining the house. These days we are seeing more and more vehicles priced over 50 grand and people who hire a team of landscapers to care for the lawns. It is like we are under attack. The housing bubble scares me because if the McMansions go bust they will try some kind of scheme with these homes and I will get burned in taxes and live next to suckers than paid 5 times what their house is worth by the time the last sucker arrives.; November 14, 2006 8:38 AM
Anonymous said...: I'll play devil's advocate here.

For all of the charts and graphs plus the dooms day blogging on this forum I still on a daily basis see people doing well. There are new cars running the streets and sales of liesure based goods like iPods are strong. People are still flying and taking vacations.

So what if they are in debt? That is the American way for a majority of the people.

And don't tell me it will just crash and there will be blood in the streets. We've been hearing that for at least 4 years since oil and natural gas prices surged. It never occured.

People are in debt to the tilt. All the 4x4 and mcMansions you see are all on credit. What happens when all these people start paying their debt back ? What happens when interests rates go up ? Consumer spending goes down, jobs are lost, people are made redundant. Simple economics. Classic credit bubble. It simply cannot go on forever. The Chines, Japanese and every country that the US owes money too will simply not allow it.

I am starting to see the effects in Europe (I don't live in the States). Luxury car dealerships buying back 3 year BMW's and Mercedes. Banks taking homes and plots of land. A lot less people on the city streets on the weekends. Less people at resteraunts, shopping malls.

This is just the beginning.

I don't need to go on......within 2 years there will be blood on the streets........you will go to garage sales and see great home cinemas, and flat screen tv's for 1/4 of the retail price.

Got gold ? Got cash ?; November 14, 2006 8:54 AM
Anonymous said...: holy crap... that personal savings rate is crazy.

I think most of those people consider paying their mortgage each month to be saving...

Never even hit 5%.

That was an eye opener... I had no idea... and I was thinking that the 15% that I force myself to save was not enough.... I feel over 3 times smarter than most of my fellow americans today!

ha!; November 14, 2006 11:59 AM
blogger said...: when the sh*t hits the fan, and people WISH that had saved for that rainy day that always comes, they'll have nothing.

Just fake equity in their house that no longer exists.

Amazing.; November 14, 2006 12:16 PM
Anonymous said...: Those charts make me sick. Contrary to what the screwed up US government urges us to do, I save a very large percentage of my pay, at least compared to the majority of US (Unlimited Spenders?) citizens. Sometimes I get the feeling that its all for nothing, because depending on what happens from here on out, all that I save could be worth nothing thanks to the rampant greed here.; November 14, 2006 1:25 PM
Anonymous said...: Those charts make me sick. Contrary to what the screwed up US government urges us to do, I save a very large percentage of my pay, at least compared to the majority of US (Unlimited Spenders?) citizens. Sometimes I get the feeling that its all for nothing, because depending on what happens from here on out, all that I save could be worth nothing thanks to the rampant greed here.

If you have saved.....then you have nothing to worry about apart from a run on banks.

You will be sitting pretty when D Day comes.; November 14, 2006 1:32 PM
Anonymous said...: "If you have saved.....then you have nothing to worry about apart from a run on banks."

ummm, we savers might be hit by the real inflation rate. My grandmother, a TV watcher, saw a segment on TV (cnn?) that talked about inflation and how $100,000 saved in today's dollars would be worth $50,000 at retirement.

One of the ways in which the US government wants to save the system is through an inflationary monetary policy.... so they pay pensions but with dollars that don't buy much and let you pay the rest...; November 14, 2006 2:29 PM
Bill said...: There are new cars running the streets

--------------------

ya on 72 sometimes 84 month loans...ya things are great.

I will buy nothing as i already have my share, as well as my kids...christmas in my house is a family get togeather that is it, if i spend $300 on each of my kids they will be lucky..as there really is nothing to buy that is not already lying around the house not being used...i refuse to; November 14, 2006 3:09 PM
Miss Goldbug said...: Anon said: "And don't tell me it will just crash and there will be blood in the streets. We've been hearing that for at least 4 years since oil and natural gas prices surged. It never occured".

Never say never my friend. Why is it all the car companies are building smaller cars and Hybrd editions?

This is the writing on the wall to the gas guzzling consumer. They are telling us gas $ is going to the moon. Get ready for high prices next year.; November 14, 2006 3:16 PM
Anonymous said...: 10 years ago, if you were carrying a $10,000 balance on your credit card, the lender would charge you $400 - $500 per month on the payment. Today, that minimum payment would be anything from $150 - $250 for many credit card issuers. Prime Rate in 1995 was 8.75% - today it is 8.25%. Minimum payment requirements on revolving credit has been going down - but, one day, it might go up. Anyone carrying a significant balance on credit card(s) would be short on money overnight if their lender decided to increase the minimum monthly payment. Imagine if you will a bank where a sudden unexpected run on deposits (people needing their money now) created a short squeeze. As part of their strategy to meet depositor withdrawl, the bank might decide to increase the rate paid on its c.d.'s for the short end and increase its rates on its money market accounts (already happening folks) and, eventually it may decide to increase the minimum monthly payment on any of its revolving loan balances (credit cards or open end credit) to help fund depositor withdrawls. The balances carried by Americans is approaching idiocy and the day any of them wake up to a notice saying that their minimum payment just went up from $200 a month to $500 a month there is going to be a rude awakening on a personal level. If that were to happen en masse, that would be interesting, in the least for those of us on the sidelines watching. You are witnessing a credit bubble chasing real estate and the trappings of a "non-negotiable way of life". Ha! I laugh everytime I think of that phrase.

Smug Bastard; November 14, 2006 3:21 PM
Anonymous said...: The system is bankrupt.. rotten to the core. Out of control consumer debt.. worldwide governmental debt. Just a matter of time before the monetary printing presses are running full blast on overtime.

When everyone is a millionaire what is the reality of it all? Just paper promises that can be burned in some future winter time cold. In essense worthless.

Now smart money will have nothing to fear.. being fully vested in something that has retained wealth for millenias.; November 14, 2006 4:46 PM
Anonymous said...: "Never say never my friend. Why is it all the car companies are building smaller cars and Hybrd editions?"

Because that is what is hot with a segment of the population.

Car companies like all business only care about the bottom line profit. They are not worried about saving the world or helping people with their gasoline bills.

Toyota may well the best selling hybrid in the Prius but they sell 6 SUVs and will soon come out with a truck bigger than the F150 with a 350 CID engine option.

If money were going to be so tight in the future I doubt they would take such a gamble spending billions on R&D costs.

As a nation we will never get out of debt but all I'm saying is that the BS will keep going on and some new scam will form. When the dotcoms burst they came up with housing. They will find something else to inflate the price of and sell to e/o.; November 14, 2006 5:05 PM
foxwoodlief said...: Twib has it right on the skewed numbers for savings.

Statistics can be manipulated to say anything they want. The news makes it sound like we've been in a depression for ten years but when you drive around you see a different picture. And a lot of people are like, "Things are bad, but life is good for me." It is as bad as saying 100% of those on death row ate peas as kids so therefore peas are responsible for creating killers.

Also BK was expected to go way up after the BK bill was passed, the rush to the exit before stricter rules kicked in. My wife's old job was in BK at the law firm she worked at in Phoenix (on the creditors side, not the debtor) and with all the changes they had to close their BK department because the new laws reduced the demand and need for their services.

It is also like AIDS. Amazing how in from 1980-84 people who were young and healthy died in a matter of days when they entered hospitals. They all had collapsed immune systems with three identifiers, candisis, pnuemoscystis, or Karposa Sarcoma (quite often in the lungs-a place it isn't normally found). This isn't the place to go into all the issues on this and how the government created this disease and what we now classify as AIDS and HIV are not the same disease, but once they classified HIV as the virus (a virus they had already isolated but needed to attach to a disease to get money) suddenly the statistics soared because the classification expanded from the original three to about 30. HIV+TB=AIDS, HIV+cervical cancer=AIDs, etc. Having worked in the medical field I saw the manipulation of numbers. Not to mention the thousands killed by toxic AZT. Once they stopped poisoning patients with AZT the death rate dropped and of course they covered it up saying treatments were making people live longer.

Point? Statistics don't mean anything if people want to skew them, the old isegisist vs exegisist interpretations of data, scripture, history etc.

I'm still waiting for Jesus to return.
I'm still waiting for Sadaam to be declared the Antichrist.
I'm still waiting for home prices to fall to 1990 prices.
I'm still waiting to be able to return to the coast of California where I was born and buy a bungalow for $12,000.

I guess we'll all be waiting a very long time.; November 14, 2006 5:21 PM
Anonymous said...: First thing was the dotcom bubble.. pop!

Second thing was the realestate bubble.. bang!!

Next will be the way overvalued stock market bubble.. ka pow!!!

Finally a mad dash for the exits and something that holds value during chaos and calamity.. gold.. and the ensuing bust.. ka freaking boom!!!!

Then we get to see these high rollers living like swine in the streets.. ready to slice someones throat for something to eat.. yeah!; November 14, 2006 5:27 PM
Anonymous said...: personal savings rate chart is a canary in the coal mine. it has been a measure of real cash savings for a number of years. when it goes negative, investment dollars may remain steady but those investments are only readilly made into money via a buy/sell transaction taking place. when was the last time you saw someone in the check out line at Wal-Mart trying to pay for their cart of stuff with a Microsoft stock certificate? Or a gold bar? Every investment requires two parties to be turned into real money...a seller and a buyer. The housing market is finding out what it is like to have only one side of the equation covered (a potential seller) in some situations. Surplus of sellers and inventories and a marked decrease in potential buyers equals market stagnation. That is where we are today and where any "investment" market can find itself. Don't make the mistake of disregarding the personal savings rate as just manipulations. Take a look at the amount saved during 1999 - 2000. It was positive despite everyone and their brother being heavy into equities.

Smug Bastard; November 14, 2006 6:15 PM
Anonymous said...: If and when the FDIC ever has to step up to the plate and pay out $100,000 to all those depositers on record.. a single loaf of bread will probably cost $100K. (due to runaway inflation)

Anyone get a report on that M3 lately?; November 14, 2006 6:26 PM
Anonymous said...: Nope, think S&L bail out if you are old enough to remember or have lived through same. If you see a local bank start selling what appear to be insured deposit products but really are not, their end is near. RTC made good on S&L promises when they failed. Taxes went up and things got tight but you didn't see $100 loaves of bread. If this unravels (I say "if" because no one on this blog or in any circle can say with absolute certainty that there is going to be a meltdown or depression) look for higher taxes to be a liklihood. There are too many variables to say what will happen or won't happen.

Smug; November 14, 2006 6:43 PM
Anonymous said...: Give this PDF to all the clueless people you know -- it really teaches you the real deal about finance, debt, interest, etc.

http://debt.cpa-site.com/

I'm seroius -- print it out and give it to people. It's only 8 pages. Leave copies in the bathroom stalls :)

Imagine if enough people could read this -- the stock market would finally correct, people would pay off their debts, etc. It would be great!; November 14, 2006 6:56 PM
Anonymous said...: In the 1980s the federal government saved Chrysler Corporation from financial ruin.

Will they save GM or Ford in the next few years if needed?; November 14, 2006 7:25 PM
Anonymous said...: An interesting article that deserves debate for any interested persons:

http://www.federal-reserve.net/majorfraudsoftheusmonetarysystem.htm; November 14, 2006 7:42 PM
Anonymous said...: For some reason that http got chopped...

http://www.federal-reserve.net/majorfraudsoftheusmonetarysystem.htm; November 14, 2006 7:47 PM
Anonymous said...: This will only be reversed by a precipitous decline in the US dollar. With oil prices at $100 per barrel in devalued US currency, the trade deficit will be solved.

These excesses will be eliminated by the Greater Depression.

Buy gold, silver and foreign currencies or be creamed!; November 14, 2006 7:49 PM
Anonymous said...: That last part that keeps fading out...

major frauds of the us monetary system.htm

Add that section with no blanks between the words.; November 14, 2006 7:50 PM
Anonymous said...: "..Buy gold, silver and foreign currencies or be creamed!.."

Foreign currencies are so wrapped up in the dollar that deflation or hyperinflation will pay a visit to them also.

Gold was confiscated before in the '30s and can be confiscated again.; November 14, 2006 7:58 PM
Anonymous said...: The next bubble the government will inflate will be the dollar bubble. Only, the inflation is already here and in an attempt to save the US from a recession will result in hyperinflation.

There will be a popping and no one really notices the bubble since it has been inflating since 1933. The US dollar will find its true value, less than zero!; November 14, 2006 7:59 PM
Anonymous said...: One day someone will be able to buy all those trillion dollars of debt.. with a gold bar or some other measely token.. because they the trillions are essentially worthless!; November 14, 2006 8:04 PM
Anonymous said...: Just for laughs I was listening to Bloomberg radio today and they were talking about how the money supply is barely growing. The guest actually said that monetary expansion is “almost zero” so we are facing disinflation? See chart. What kind of morons do they think we are?; November 16, 2006 1:01 AM
Anonymous said...: The Feds are manipulating the data so much.. nothing can be trusted.

I assume their fear is thinking heads are going to roll literally and figurtively when both economic and capitalism slide into ugly massive failure...

Read article:

http://www.hyperinflation.net/essays/englund36.html; November 16, 2006 9:18 AM

HousingPANIC - The Housing Bubble Blog with an Attitude Problem, 2005 - 2008

November 13, 2006

A picture is worth 1000 words - The out of control American consumer

38 comments:

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