HOUSEHOLDS ACROSS U.S. REGAINING WEALTH! But HOME PRICES May Still Be Trending Downward!
HOME PRICES REBOUNDING - BUT STILL, ON AVERAGE NATIONWIDE, 30% OFF MID-2006 PEAK!
Are home prices bouncing back?
Here in Chicago, according to an article by Jeannine Aversa in today's edition of The Chicago Tribune, they seem to be coming back up - but they are not anywhere near the stratospheric levels seen just a couple of years ago. Across the U.S., average home prices gained about 1.8% during the Second Quarter, 2009.
But all is not rosy!
Home Equity, calculated by subtracting the mortgage balance owed on a home by its current estimated market value, continues to decline. According to Moody's Economy.com, homeowners nationwide built slightly over 43% home equity during the Second Quarter - up just a bit from the record low equity figure measured during the First Quarter of this year. The research firm further estimates that nearly 1/4 of all U.S. Homeowners owe more on their mortgage than their house is presently worth.
How did this happen?
Start with the prevalence of easy-to-obtain Home Equity Lines of Credit just a few years ago, and combine that with the steady decline of home prices, on average, since 2006.
Other factors in the Second Quarter combined to make Americans, as a whole, nearly $2 Trillion wealthier than in the First Quarter, 2009. The modest rise ends a lengthly string of quarterly wealth declines - the longest continuous stretch of wealth declines, according to the U.S. Federal Reserve Board, in 57 years.
Average Net Worth - the value of all held assets, including Real Estate, Stocks and Bonds, Checking and Savings Accounts, and other investments - minus total debt - edged upward to $53.1 Trillion during the Second Quarter. However, the Net Worth statistic is still nearly 20% lower than it was during headier times just a couple of years ago.
How long will it take for U.S. Households to recover the losses they have endured thus far during our economic recession? Many experts feel that could take several years more!
Economists at IHS Global Insight estimate that American Investors lost $14 Trillion in wealth since our current economic downturn began in earnest in the Fourth Quarter, 2007. Brian Bethune of IHS estimates that only $2 Trillion of that fall-off has been recovered thus far.
American's Stock Portfolios also gained in value during the Second Quarter, after hitting their 2009 low point in March.
Some other observations -
1. Fed Chairman Ben Bernanke suggests the worst economic downturn since the Great Depression in the 1930's is likely over. However, he predicts the coming economic recovery won't be brisk enough to keep unemployment - currently at a quarter-century high nationwide of 9.7% - from further escalating.
2. Retail Sales last month jumped by the highest percentage in any month over the last three years. But continued high unemployment numbers, as well as continued tight business and consumer credit, will likely dampen retail growth, at least in the short term.
3. U.S. Households continue to Trim Debt! During the Second Quarter, total household debt, including mortgage notes, credit cards, auto loans, and other installment loan payments, stood at $13.7 Trillion. That's down from $13.8 Trillion during the First Quarter, and a peak of $13.9 Trillion during its peak in Spring, 2008.
4. The average Savings Rate - total savings as a percentage of income after-tax - rose to an attractive 5% during the Second Quarter. Many are building their savings in order to attempt to trim down their expensive debt.
DEAN MOSS & DEAN'S TEAM CHICAGO
