Be Very Afraid: The American Economy Is Cannibalizing Itself, and We the People Are Going to Pay

[KurtNYC]

6. real wages (buying power) have been declining since 1979

now the birthrate has declined to below a replacement rate. While the article focuses heavily on the stock market, the bigger share of real wealth is in real estate and the future of real estate looks pretty poor.

Declining demand -- fewer kids, fewer families -- and declining ability to pay have to lead to a decline in real estate values. Trillions of dollars in value reduced by even 5% is trillions lost. The 30-year mortgage is an American creation which seems designed to keep people paying interest throughout their working career. The grand bargain was that you worked your ass off for 30 years and then you can retire without house payments. What really made this work was that houses used to go up in value. So if one bought a house in 1983 for $60,000, one would pay about $100,000 over the 30 years but would have a house that is today worth $140,000 or so.

But what if home values continue flat or decline? Add in damage from more frequent hurricanes or the turbulence of cities abandoned by government and banks (Detroit) and you have a financial black hole. If the price of oil spikes again, you have a shift in real estate values because homes that are more expensive to heat or to commute from may become un-workable. Detroit is the first modern ghost town in America. Unfortunately it will not be the last.