Huffpost Business
The Blog

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Dean Graziosi Headshot

It's Not Real Estate -- It's the Economy Stupid

Posted: Updated:

Whether you're a real estate investor, a homeowner, or you're just interested in how home prices are doing these days, it's easy to find media coverage to support just about whatever attitude or bias you may have. News was very consistent from 2007 through 2010, as the crashing market kept everybody in a bad mood. However, from around 2011 to the present, news about the "recovery" has been all over the map.

A recent article on a website for mortgage professionals tell us that California cities hold the top five spots for home price and market improvements recently. The same report states that Ohio, Florida and Missouri are sharing the bottom of the list for improvement. Headlines are confusing, telling us that:

• 30 percent of all home purchases have been by investors with cash.
• The millennial generation is moving back in with their parents, not buying homes.
• First time homebuyers are just nowhere to be found.
• Some markets around the country are recovering to the point of bidding wars.
• The median price for a home is now $191,600, up 9 percent year over year.
• The U.S. is becoming a nation of renters.

When it comes to housing news, it's a new movie title: "The Good, the Bad, and the Mediocre." We can continue to analyze the housing market and home prices till the cows come home, but it really isn't just about homes and whether the American Dream is still intact. It's just logic that as long as people have the financial ability to own a home, they'll prefer that to renting. We all want to own our little piece of the planet.

When it comes to the financial ability to purchase a home, make the mortgage payments, support other debt, and to feed, clothe and protect our families, we're not in a good place on average. Right now, more than half of Americans surveyed believe that the economy is "getting worse," while 41 percent think it's improving.

The Organization for Economic Cooperation Development reports study results for 2001 through 2011 related to household net disposable income in the U.S. Net disposable income is the maximum amount people can afford to spend without having to take on debt or tap their savings. The study shows that this amount has risen on average only 2 percent per year over the ten year period. With inflation over the same 10-year period averaging 2.4 percent, it's not a pretty picture. In March, the median family income was $53,000, lower by 6 percent than the $56,271 number in December of 2007. The average non-farm worker's income in April was $24.31 per hour, up only 1.9 percent from a year ago.

There are arguments about whether the massive increase in student debt is a major contributor to a drop in home purchases by the younger generations. It really doesn't matter as much as the lack of high paying jobs available to these indebted graduates. Another set of statistics shows that first-time homebuyers have dropped from 40% of the market to 30%. This statistic comes from the National Association of Realtors report: Realtors' Confidence Index. However, the same association has a long standing report titled Profile of Home Buyers and Sellers that tells us just the opposite. The latest report states that the percentage of the market made up by first-time buyers is holding steady. The discrepancy is in part aggravated by the spurt of buying due to the first-time homebuyer tax credit in 2009 and 2010.

A lot of people are employed in tracking the real estate market, mortgages, foreclosures and home prices. They need their jobs, so they should keep up the good work. However, I'm solidly in the camp believing that "It's the economy stupid."