Savings rate lowest since the great depression (living on borrowed time?)

The Cincinnati Enquirer ^

[frankjr]

I am assuming housing value is excluded from the savings rate. I wonder if mortgage loans are included on the debt side.

[syriacus]

Home ownership is up. Money can't be two places at once.

[Investment Biker]

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.

[A.Hun]

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

[Juan Medén]

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.

[JimRed]

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.

[syriacus]

Home ownership in Iowa

1930 54.7%
2000 72.3%

[jiggyboy]

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.

[syriacus]

I think a more valuable assessment would be changes in average American net worth, taking into account adjustments for inflation.

Sounds good.

[A. Pole]

Home ownership is the best form of savings available. Average return on investment averages 17% per annnum. What bank will give you that?

Hmm, and what if the prices of homes go down?

[A. Pole]

Home ownership in Iowa
1930 54.7%
2000 72.3%

What do you mean by the ownership? If you buy house using no interest loan, do you become an owner?

[50sDad]

Bushwah! Both I and my wife now have the best paying jobs we have ever had, and half our pay is paying off credit cards we had to use when we were both unemployed. We are making $1000 payments on our debt, and loving it! Seems like some Old Media can take great news and spin it to tragedy with no work at all!

[AZRepublican]

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.

[syriacus]

As regards housing though, it is now a moot point whether it is counted as savings or not.

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. :)

[syriacus]

I am only pointing out that people are putting their money in their homes, rather than throwing it at their landlords.

[syriacus]

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?

Sounds like a worst case scenario.

[syriacus]

What do you mean by the ownership? If you buy house using no interest loan, do you become an owner?

Another worst case scenario.

[Lou L]

Average return on investment averages 17% per annnum

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.

[Juan Medén]

They fluctuate over time. But real estate has proven over the years to be among the best investments a person can make.