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Confidence and housing data are positive but are we aware of what lies ahead?:
Bottom Line: Both pieces of economic data yesterday were positive. 1st the housing information via the Case Shiller Index of the 20 largest metros:
Now for Consumer Confidence:
Now for a reality check… The housing recovery is real and sustainable (I’ll have that story next). The Consumer confidence reading tells us the following:
But it also tells us:
I’ll pick up on the Fiscal Cliff piece. The fiscal cliff wasn’t cited as a significant negative factor in confidence. That’s because the general perception regarding the fiscal cliff is that it doesn’t apply to us (whoever we happen to be). The prevailing reason…?
While most know that tax increases are part of the fiscal cliff – they don’t know that it applies to them. So much of the conversation regarding taxes has focused on the Obama defined rich of 200k individual income or 250k household – that others don’t realize that as it stands now every working American faces a tax increase in 34 days. If they did would they be spending the way they currently are? Some people will face tax increases of up to 10% but don’t have a clue. That means there is serious risk associated with our consumer behavior and future confidence based on the outcome of the fiscal cliff.
To properly prepare you should figure out how much of an increase you will incur if we do go over the cliff. I have information in the link below.
Summary of the tax changes as it pertains to the fiscal cliff:
Case Shiller chart:
Housing recovery continues but is it sustainable?:
Bottom Line: So the Case-Shiller info continued to show a recovering housing market with
No we are not. This recovery is absolutely sustainable. Why?
By definition they won’t default and be part of a problem. By comparison – in 2005 only 11% of local properties were all cash deals.
So what about the homes being financed?
Mortgage companies want to keep you under 32% of your gross income with a mortgage payment. We’re not even close to being over leveraged. In fact we could double our mortgage payments and still be in a sustainable level. In other words the housing recovery is on solid footing and if anything is becoming more attractive as many reallocate investment money out of equities.