And I've seen nothing to indicate that wages are anywhere near keeping up.
Yep.
My feeling is that a lot of other people see it the same way and that's what drove the variable-rate fiasco that's imploding the sub-prime industry as we speak. People didn't feel their incomes were keeping up but they still wanted more, so they used the most convenient means at hand to get it - variable rate mortgages with an escrow opt-out. Not thinking about the consequences (and, quite honestly, usually not the kind of folks who thought past their nose anyway) they got themselves into a bind when the rates jacked up or something went haywire with their income - new kid, loss of a job, just plain overextended, etc.
A little perspective though... The money hasn't gone anywhere, it's just tied up in property or not being spent. As with the Great Depression, the amount of money in the economy didn't change. It was people's spending habits that took a radical turn. They stopped. And when people stop spending, things stop being bought, which means companies that make things make fewer or none at all, and the companies slow down, and employement slows down, and capital improvements slow down, and... well, you get the picture.
Our economy is based on one thing and one thing only - our belief that it's working. That's it. It works because we believe it's working. When we are optimistic we tend to spend and borrow more, and the economy is stronger. The inverse is true when pessimism sets in.
Also, a lot of people put great import on how much credit card debt a household has - equating that to general stability - but we never hear about overall debt or net equity, which are much more indicative. Sure, a house may have $9000 in credit card debt but have no other debt obligations. On the other hand, I know a lot of people who take great pains to keep their credit cards paid off but have six, or even seven, figures in other "stuff" that they are making payments on without blinking an eye. Houses, boats, bikes, lake cabins, TVs, furniture, you name it. They have no credit card debt but are in hock up to their eyeballs with everything else they financed to support their lifestyle.
Also, as the new housing starts slow (fewer new owners) the occupancy rates for rentals tend to rise from the people who are renting instead of buying. This means people buying rental property, which are traditionally some type of existing home. It won't show up on the radar as a housing start but it is a housing transaction. It's just not as sexy on the news as "new home sales" so you rarely see it.
Brad
