Yeah, just ignore the huge tax change that took place in 1997.
Looks like a steady trend to me with pullbacks that are progressively less severe.
No, this time you say it's different because people are buying homes with mortgages they can't afford and once all those unaffordable mortgages catch up with them, doom will certainly befall us resulting in economic collapse. (and gold skyrocketing to $1,650 and ounce, or more!)
Figure 2 shows the distribution of property debt burdens for two years, 1995 and 2004. Notably, the distribution has shifted slightly towards higher debt burdens over this period. However, this shift is small enough that the 1995 and 2004 distributions remain similar. As in every year since 1989 a majority of households that had property debt in 2004 devoted less than 20% of their incomes to servicing that debt.
What we do know from the data is that the share of households with high debt burdens is similar now to what it has been in past years. In 2004 about 5.5% of households with property debt had debt burdens over 0.50, roughly similar to the fraction in earlier survey years.
Figure 3 shows the 2004 distribution of households' home debt burdens by whether or not they have an adjustable-rate property loan. It seems that holders of adjustable-rate loans fit almost exactly the same pattern as other households. They are more likely to have debt burdens in the range of 0.2 to 0.4, but all the differences are small. These statistics suggest that most households that use adjustable-rate loans are not using the lower interest rates to fund insupportably large debts.
I realize that this information is only through 2004 and that in 2005 the use of adjustable-rate mortgages increased thereby increasing total mortgage debt. However, can the doomers here show us that these changes have affected the distribution of debt burdens and that this increase in adjustable rate mortgages will lead to economic collapse? Even though the use of adjustable-rate mortgages has increased, where is the proof that just because households have some of their property debt in adjustable-rate mortgages that they have high debt burdens, and can't adapt successfully to higher interest rates. The trends identified above would indicate that most consumers have a lot more money and sense than doomers here give them credit for.
As the chart below shows, the added debt from those loans has barely impacted our median property debt burden through 2004.
Very interesting chart. This rise since 1990 seems to be very gradual and is along the major trend. The other large falls were preceded by a VERY sharp increase - something we don't see at the moment.
Want to see something scary ?
Look at the 80%+ correlation between the NAHB index and the S&P500 where the S&P500 lags the NAHB by twelve months. This uncanny correlation has held for the past ten years.
Then look at the precipitous 50% drop in the NAHB that started nine months ago...
I would NOT be in the stock market until the housing situation is sorted out.
BUMP