Friday, February 13, 2009

Household Wealth Plunged In ‘08, Reversing Rise

Borrowing for second homes accounts for part of the large increase in debt over the last five years. This is something that is not being discussed or factored into the current housing situation. An enormous amount of second homes are going into foreclosure and even more are on the market for sale. This overhang in the housing market is likely to continue for a long time. Is anyone in the government discussing supply and demand as they look for a quick fix for the housing crisis?

The drop in the stock market is hurting the newly retired and really weighing on Baby Boomers.
clipped from

U.S. household wealth appeared to have plummeted in 2008 in the face of falling values for stocks and homes, a Federal Reserve report showed, more than reversing gains achieved over the previous three years.

According to the Fed’s survey of consumer finances, released Thursday, average net worth is estimated to have fallen 22.7% from 2007 until October 2008. The median, or midpoint, fell a more modest 17.8%, suggesting declines were centered among wealthier families.

The share of households with loan payments exceeding 40% of their income rose 2.5 percentage points between the 2004 and 2007 surveys, to 14.7%.

Borrowing for second homes was a big factor pushing up debt between 2004 and 2007, the Fed said. –Brian Blackstone

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