Today saw the release of the US Savings rate, which improved from the last reports. It is still in negative territory at -.8%, but is up from -1.2%.
I know, many of you probably don't follow this number, and some may not even know what it means. Basically, its interpretation is that Americans continue to spend more money than they make, hence the negative number. It does leave out some information such as house appreciation (or depreciation).
What it means to us in the real estate market, especially those doing mortgages, is that there is still a major need for Americans to seek certified mortgage planners, and I mean the ones that can prove they earned the title, and be able to properly integrate their mortgage into their overall financial and investment plans. Failure to do so, could be detrimental to your financial health.
The one curious question I have at this point, and hence the title of the post, is about why the numbers are improving. My first reaction to the numbers was a slight sigh of relief thinking Americans are finally getting the point and curbing their spending. I say slight sigh, because we still have a long way to go.
Then it dawned on me. Could it be that Americans are reducing their spending due to their inability to tap into their home's equity and buy more things. Now, I have never, nor will I ever, advocate taking out equity and "consuming" it. And that is what many Americans have been doing, using their home as a personal ATM machine.
So, while it is encouraging to see the numbers start to move in the right direction, I am left wondering if drops in real estate pricing have left many Americans "ATM" accounts empty.
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Just noticed this post.In my opinion there is plenty of equity around, but it is the equity that doesn't get touched those you have built it by paying down their mortgage rather than rapid appreciation. Most reports show that homeowners over 50 have on average 30 to 50 percent equity, but most likely it is going to be tapped for a mortgage. Also I know it sounds weird, but the savings rate does not take into account money that goes into tax deffered accounts such as 403b, 401k, ira's etc so it severly underreports what Americans actually save.
I think it is crazy, but thats the way it is just like inflation numbers only caculate rent for housing expense not average homes price.
Interesting topic