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June 13, 2008

Comments

deichmans

John,

I'm not sure this is a bad thing. What the hump in the curve (since 2002) tells me is that a lot of people were spending their equity, using their mortgage like a self-subsidized ATM (we were in that boat too -- living well beyond our single-earning means, GS-15 grade notwithstanding).

The downturn has two forces pushing it down:

1. Evaporating equity (which in many markets was grossly overinflated anyway -- how else can one explain >$500/sq ft real estate values in my hometown of Alameda, Calif. compared to <$90/sq ft that we spent on a far-superior home in Oak Ridge, Tenn.?), and ...

2. Increasing conservatism by consumers. We have pared our own expenses down pretty significantly in the past several months, without (IMHO) compromising standard of living. And we're in a market where home values have INCREASED the past two years (by approx. 9.4%, according to Zillow.com).


James Bowery

The preferred name for "Measure of Economic Welfare" is "Index of Sustainable Economic Welfare":

http://en.wikipedia.org/wiki/Measure_of_Economic_Welfare

http://en.wikipedia.org/wiki/Index_of_Sustainable_Economic_Welfare

It is sardonically hilarious that this measure of "sustainability" is crashing.

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