Posted on 02/01/2006 6:04:26 AM PST by AZRepublican
The Commerce Department reported Monday that the nation's savings rate was a negative number last year.
You read it right. The average household didn't save a dime last year. In fact, the report said, Americans either took on more debt or dipped into previous savings in 2005 - to the tune of one half of one percent of their after-tax income.
The savings rate in the United States hasn't been this low since the Great Depression. But back in 1932 and 1933, unemployment was rampant, and many families had to break the piggy bank just to keep food on the table. This time, the analysts are saying, Americans seem to be spending money they don't have just to maintain a lifestyle to which they've become accustomed.
(Excerpt) Read more at news.cincypost.com ...
I am assuming housing value is excluded from the savings rate. I wonder if mortgage loans are included on the debt side.
Home ownership is up. Money can't be two places at once.
Someone once said - There are only two thing you can do with money. You can spend it or you can save it to spend later.
They had to find some bad news somewhere....lots of good info on the savings rate and how this is figured on this thread:
http://www.freerepublic.com/focus/f-news/1568624/posts
I agree. Home ownership is the best form of savings available. Average return on investment averages 17% per annnum. What bank will give you that?
Moveover, are they taking into account pensions, 401k's, IRA's and stock portfolios? I think not.
I think a more valuable assessment would be changes in average American net worth, taking into account adjustments for inflation.
My first thought as well; home equity is way up. And the rate of return (at least over the past four or five years) has been much higher than most savings plans.
1930 54.7%
2000 72.3%
Unrealized capital gains in houses, IRA's, 401K's, etc. are not included in the savings rate. Money you put into IRA's and 401K's is included.
But there hasn't been much gain in IRA's and 401K's this past calendar year, if you have it in the usual kinds of plans.
As regards housing though, it is now a moot point whether it is counted as savings or not. The value of your house is done going up at more than a couple of percent per year for the next couple of years. In many of the bubble areas, it's already down 5-10%, and many other areas will be starting that long road down soon as well. The housing ATM is closed.
Sounds good.
Hmm, and what if the prices of homes go down?
What do you mean by the ownership? If you buy house using no interest loan, do you become an owner?
Yeah, BUT isn't it considered BAD that people are mortgaging their homes and have little equity and are at the mercy of continuing home appreciation which we all know wages cannot sustain?
Something tells me cold cash and gold is going to be the only thing worth holding.
Which explains why folks around here are now only able to sell their houses at 1500% of what they paid, rather than 1800 % of what they paid. :)
Sounds like a worst case scenario.
Another worst case scenario.
Source for that? Over how long a period of time? In which market? For which type of houses--tract, or custom?
I don't disagree that a home is a great investment, but 17% is stretching it. Not everyone is going to realize that kind of appreciation. Besides, it's better to diversify IMO, and have some savings in equity investments too.
They fluctuate over time. But real estate has proven over the years to be among the best investments a person can make.
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