[SHILOH]

“The absence of any growth over the last five years in real average weekly earnings for 80 percent of workers is particularly striking given the fact that productivity has been soaring. The Labor Department reports that nonfarm business productivity (output per hour of labor) has increased nearly 17 percent during the past five years ending in the second quarter of this year. Yet the cumulative increase in the average real hourly earnings of production/nonsupervisory workers has been only 2 percent, rising from $8 per hour in the second quarter of 2000 to $8.16 per hour (constant 1982 dollars) for the second quarter of 2005. (In fact, during the last two years, when nonfarm business productivity has increased by 6.6 percent, the average real hourly wage for production/nonsupervisory workers has actually declined.)
Other data indicate that incomes have stagnated for a large portion of U.S. families. For example, the median level of real household income has actually declined from a cyclical peak of $44,922 in 1999 to $43,318 in 2003, the latest year for which statistics are available. This $1,600 difference reflects a decline of 4 percent.” THIS IS FROM 2005 but is still relevant. The trend continues and now the bubble will really hurt workers.
link:
http://www.washtimes.com/op-ed/20050824-091828-7473r.htm

[SHILOH]

Stagnation of wages is described in the excerpt below. It is apparent in the disparity between corporate profits distribution to workers, while worker productivity rises. Also – things like health care costs rise and eat into wage increases (inflation) and so there is stagnation because the average American worker cannot get ahead. The hamster on a wheel –running, expending energy –but going nowhere. It’s a well known business trend that executive pay is 100s times higher that worker pay – a disparity that has grown in enormous proportions over the past couple decades.

“…The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data….”
(Real Wages Fail to Match a Rise in Productivity
By STEVEN GREENHOUSE and DAVID LEONHARDT
Published: August 28, 2006,NYT)

On a related topic, one article said corporate profits are held at the top for “investment” having to do with propping up their stock value. Can someone give a good explanation of that?

[SHILOH]

THe wage increases –are they across the board? Because the min. wage did not increase that much. So what sector showed an increase in wages?

[SHILOH]

Can someone explain, how long will the lender keep an REO? Does this allow them to pump up their $$ solvency if they have this on their books at the high appraised value? When is it unprofitable for the lender to hold onto an REO?

[SHILOH]

I read there is a record 7 trillion in mortgages “out there.”

Could there be 1 trillion in subprime going bad for the next 5 years?

If so, will 300M or $500M thrown occasionally thrown into fix…going to have any real impact?

[SHILOH]

Corpus Christi TX is undervalued.

[SHILOH]

“Did RE/MAX merge with the WWF or what ?”

excellente funnito

[SHILOH]

“Could it be that housing is one of the few items actually priced correctly when the devaluation of the dollar is conisdered?”

How can housing prices be “priced correctly” when the reason for the outrageous inflation of housing in places like SD was fueled by a psychology of “Irrational Exuberance” and shoddy lending practices? Looking below North County, for example, it makes no difference if someone wants to claim that a bunch 50 year old home in South Bay or National City or Lemon Grove or Logan or elsewhere are “priced correctly” at $500K — when they are 10 times the household median income and unaffordable. Anyway it’s spinned, homes are not priced correctly if they are totally unrealistic in pricing to their potential buyer.

Despite the weather in San Diego –quality of life has less to do with sunny weather and more to do with whether you can do more with your time and $$ than service a mortgage that is 10X your income.

If hospitality is the largest growth industry – it does not pay enough.

[SHILOH]

“articles like these make me think the bottom may not be far away . . . or worse may have already passed.”

I don’t get this, how can the bottom have passed when there is a glut of inventory and a credit crunch for those who otherwise would be buying these overpriced homes?

A lot of inventory + more inventory from foreclosures + no buyers….it would seem would equal lower prices.
Like any supply and demand.

Those who are holding the properties carry all the liablities and ownership costs, so it’s in their interest to rid themselves, but if there are no buyers, then an incentive would be to lower prices even more.

[SHILOH]

“Submitted by forsale_2007 on April 25, 2007 – 9:56pm.
“I didn’t say housing was going to rebound. But a amagadon housing slump would have been nicely accelerated if you had an employer(s) like QC dump. It hasn’t, and will probably take some time for this to happen.”

Based on what I have read on Piggington’s – the run up in employment that also fed into the house price run up —was a combined influence of the home building & lending market. Construction of homes and related industries were the big employers making $$ from 2000-2006. Now several major builders are over-extended and in trouble -as well as lenders going belly up.

There is not enough $ at QComm to prop up the fall-out of companies like New Century or Countrywide’s financial mess and the escalating foreclosures in SD.

But it would be interesting to know exactly how many millionaires there are in SD and how exactly they earn their millions (if you can call it “earning.”) Even if they can keep prices high in some markets –overall, there is nowhere to turn for job growth in SD except maybe hospitality or education. But hospitality doesn’t pay.

I spoke with a woman from SD at a conference- whe works at UCSD in an administrative job—she told me her home on Paseo Del Rey (east of 805/around H Street) was offered 1M to sell, but she refused since she and her husband are so comfortable where she is….they bought the home about 10 years ago for around $200K

My parents live in CV down around Telegraph Canyon. The home right next to theirs was flipped then sold to a poor sucker who lost it to the bank. The bank fixed it up a bit and is now sitting on it (over a year). It saddens me, my parents are very responsible decent people…but the neighborhood was hit by flippers just like everywhere.

[SHILOH]

You can have the best spending & savings habits –still a home priced 10X your income ie, median income compared to median home price…is not sustainable.

San Diego has more Mexican “immigrants” than any other group —and in general they are not “rich foreigners.”

It would be interesting to know who all these wealthy foreigners are and what % of them are in SD buying homes.

[SHILOH]

Can anyone explain how the the US housing market is linked to the the Chinese economy. While our housing market is going down….will the Chinese lose money also – due to transactions directly related to housing?

[SHILOH]

It would seem that in a neighborhood like Temecula, homes were overvalued by at least 50% at the peak. So maybe you can figure out how much it would be worth now at normal appreciation rates.

[SHILOH]

the article says:
“Step 1. Roughly 150 millionaire households are added to the county each month, based on Claritas’ figures.”

Who are these people? Okay, so these millionaires all clustered together in their little millionaire communities…will mean, they don’t have enough places to live. Maybe they will still buy in Eastlake? THose homes going for $700K and up?

[SHILOH]

“I thought foreclosure *was* the bailout. It relieves the debtor from the responsibility of paying off the debt, and the house is given to the lien holder, the bank.”

Even a foreclosed property must be maintained, taxed,etc…while just sitting there sliding down in price. Not to mention the money already lost via HELOCs used to finance extravagance.

“If this double-bailout is in effect, it will only serve to keep prices inflated.”

Prices cannot be sustained if no one (ie the middle class) cannot afford to buy.
Unless…the goal here is for a paradigm —middle class home ownership as generational indentured servitude.

The problem for all this blood sucking is that..people who do not have $ cannot spend $. Or ” you can’t squeeze blood out of a turnip.” And credit only goes so far if you aren’t paying back. SO to the extent that you are strapped to your house…you cannot spend in other areas of the economy.

THerefore – this current housing market will suck the life out of the middle class unless it falls way down to traditional workable fundamentals.

[Author]

Posts