America’s middle class is having a difficult time. They are not sharing equally in the Fed-induced stock market surge and real median household income is the lowest since 1995.
Rising home prices (albeit slowing), stagnant wage growth and rising mortgage rates are leading to a decline in home affordability.
Take the National Association of Realtors Homebuyer Affordability Index. You can see that UNaffordability peaked in 2006 when home prices peaked and real median household income was recovering from the 2001 recession.
You can also see that AFFORDABILITY peaked in 2012 after home price declined and mortgage rates hit a low since 2000. Unfortunately, real median household income had also fallen preventing a true housing recovery.
Mortgage purchase applications remain at a 14 year low (like real median household income, mortgage purchase applications are back to 1995 levels). This results in an affordability gap due to rising home prices, rising mortgage rates and declining/stagnant income.
Unless members of the American Middle Class over substantial holdings of the S&P 500 and/or Commercial Real Estate, there massive Federal Reserve asset purchases and interest rate repression scheme has NOT helped the Middle Class.
Is loosening credit standards the answer? Do you think Federal housing policy should heap MORE debt on households that are already suffering from the aftermath of a housing/credit bubble that burst? I would say no.
The solution is not more debt, it is adopting policies that allow that economy and wages to grow. Not stifle recovery.
So, like in the movie “The Incredible Burt Wonderstone,” we have succeeded in making the Middle Class disappear!