American Economics Thread

[AndrewS]

If consumers were actually worried about the economy, why are they spending like there is no tomorrow? If people thought they’d face economic hardship later, they would save more money not spend it.

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the WSJ article you cited mentioned it as well, but it’s partisanship and negative media coverage that drives public opinion. Consumers feel quite confident on their own personal finances and are doing quite well (

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,

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) but they are downbeat on the U.S. economy as a while (because they are republicans and/or they watch tv)

Actually look at the US data.

The median net housing value increased from $139,100 to $201,000.
That is a $62K (44%) increase

But the overall median wealth increase was from $140K to $192K
That is a $52K increase

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But since you still have to live somewhere (presumably in the same property that you bought) - you can't realise the "wealth increase" tied up in your property. Plus you may not even know what the current value of the property is.

So if you exclude "property wealth increases", the median wealth figure actually decreased by $10K

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So in conclusion, the average person in the USA has become effectively "poorer".
And this assumes you are a homeowner.

Renters will be hit even worse as [higher property prices + increased borrowing rates] = [even higher rents]


Source
gobankingrates.com/money/wealth/americans-are-richer-than-ever

 

[chgough34]

Actually look at the US data.

The median net housing value increased from $139,100 to $201,000.
That is a $62K (44%) increase

But the overall median wealth increase was from $140K to $192K
That is a $52K increase

All measures of immediate risk-free liquidity: transaction accounts, certificates of deposits, and savings bonds have all increased as well.

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But since you still have to live somewhere (presumably in the same property that you bought) - you can't realise the "wealth increase" tied up in your property. Plus you may not even know what the current value of the property is.

So if you exclude "property wealth increases", the median wealth figure actually decreased by $10K

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So in conclusion, the average person in the USA has become effectively "poorer".

Housing liquidity is quite easy to tap through a HELOC or reverse mortgage. And in the worst case, someone can sell their house and rent. The only balance sheet item that has declined would be directly held stock, concentrated among old people; that’s just old people moving into retirement and selling off savings as well as the stock market doing poorly in 2022 (though the stock market has fully recovered and then some now)

Also this assumes you are a homeowner

As 2/3 of US households are; and even as homeownership has increased from 2019-2023 (and thus renting becomes more of a negatively selected trait), renters also become wealthier

Renters will be hit even worse as [higher property prices + increased borrowing rates] = [even higher rents]


Source
gobankingrates.com/money/wealth/americans-are-richer-than-ever

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. - renters are better off but better off at a substantially lower level than home owners. The long arc of American inequality strikes again.

 

[AndrewS]

All measures of immediate risk-free liquidity: transaction accounts, certificates of deposits, and savings bonds have all increased as well.

That is irrelevant to the overall situation, which is that outside of housing "wealth" increases, US median wealth has declined in the 2019-2022 period.

Housing liquidity is quite easy to tap through a HELOC or reverse mortgage. And in the worst case, someone can sell their house and rent. The only balance sheet item that has declined would be directly held stock, concentrated among old people; that’s just old people moving into retirement and selling off savings as well as the stock market doing poorly in 2022 (though the stock market has fully recovered and then some now)

Are you seriously trying to argue that when a homeowner takes out additional borrowing, knowing that there are interest and repayment costs, that they will "feel" wealthier?

And that in your worse case scenario, that they have to sell their house and go back to renting, that they will also "feel" wealthier?

As I said before, you can't easily tap into housing wealth increases, because you still have to live somewhere and can't easily cash in.

 

[chgough34]

That is irrelevant to the overall situation, which is that outside of housing "wealth" increases, US median wealth has declined in the 2019-2022 period.

Every asset item on household balance sheets increased except for stocks, which have now fully recovered and them some. Household liquidity is also unambiguously better. And since home equity is pretty easy to liquidate, it should also be counted. Illiquid wealth is still wealth.

Are you seriously trying to argue that when a homeowner takes out additional borrowing, knowing that there are interest and repayment costs, that they will "feel" wealthier?

And that in your worse case scenario, that they have to sell their house and go back to renting, that they will also "feel" wealthier?

As I said before, you can't easily tap into housing wealth increases, because you still have to live somewhere and can't easily cash in.

No. The point is that the increase in home equity is absolutely an increase in purchasing capacity - either from getting immediate liquidity or from downsizing. Since average home sizes are all quite large; downsizing is a fairly reasonable thing to do

 

[AndrewS]

Every asset item on household balance sheets increased except for stocks, which have now fully recovered and them some. Household liquidity is also unambiguously better. And since home equity is pretty easy to liquidate, it should also be counted. Illiquid wealth is still wealth.

That isn't what the article showed. It showed a $10K decline in median wealth, excluding property.

And as I've pointed out previously, most homeowners don't really have a good idea of what their house is actually "worth" after a few years.

No. The point is that the increase in home equity is absolutely an increase in purchasing capacity - either from getting immediate liquidity or from downsizing. Since average home sizes are all quite large; downsizing is a fairly reasonable thing to do

Downsizing by finding a new home and then moving is a huge deal. It is NOT easy.
And downsizing doesn't generally happen until the size of the household decreases, which usually means years.

Taking out additional borrowing on a property is also NOT immediate.
You've got the loan application process, paperwork and presumably a property survey. And again, you have interest and repayments on this LOAN.

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When the average person is in such a situation, telling them that they are wealthier sounds like nonsense.

 

[chgough34]

That isn't what the article showed. It showed a $10K decline in median wealth, excluding property.

The Fed SCF is readily available.

And as I've pointed out previously, most homeowners don't really have a good idea of what their house is actually "worth" after a few years.

Zillow estimates are accurate to 3-5% in nearly every case.

Downsizing by finding a new home and then moving is a huge deal. It is NOT easy.
And downsizing doesn't generally happen until the size of the household decreases, which usually means years.

Taking out additional borrowing on a property is also NOT immediate.
You've got the loan application process, paperwork and presumably a property survey. And again, you have interest and repayments on this LOAN.

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When the average person is in such a situation, telling them that they are wealthier sounds like nonsense.

There’s literally a documented wealth effect with home equity appreciation and simply because an asset is illiquid doesn’t mean it’s not wealth

US household balance sheets are better than they’ve ever been and in 2025 when the next fed scf drops, they’ll be in an even better position as the stock market has soared

 

[paiemon]

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Well its official now, if you want to keep your tiktok accounts remember to vote straight democrat and Biden 2024. Of course, if Trump wins that means he will go after it with a vengeance lol.

Zillow estimates are accurate to 3-5% in nearly every case.

Wasn't zillow the company that tried to use a price valuation algorithm for homes to buy and flip houses back during covid? If I recall that didn't end so well.

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[chgough34]

Wasn't zillow the company that tried to use a price valuation algorithm for homes to buy and flip houses back during covid? If I recall that didn't end so well.

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Point estimates =/= time-series forecasts. x is easier to measure than a differential equation
of x, esp. when the parameters themselves such as the risk-free rate and population growth are uncertain. Zillow estimates are very accurate when you use actual recorded sale value vs. pre-sale Zestimates (

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)

 

[AndrewS]

The Fed SCF is readily available.

Yes. Based on the Fed SCF data, the article stated a $10K decline in median household wealth, if you exclude property wealth increases.

Plus we haven't even considered inflation yet. In the 3 year period from 2020-2022, inflation has been a cumulative 14%. That further emphasises

Zillow estimates are accurate to 3-5% in nearly every case.

And how often does one do a Zillow estimate?
If you don't do one for 2years, then the average homeowner doesn't realise it's increased by that much.

Plus would you really trust the figure that comes out, since you can't realise the gain?

There’s literally a documented wealth effect with home equity appreciation and simply because an asset is illiquid doesn’t mean it’s not wealth

US household balance sheets are better than they’ve ever been and in 2025 when the next fed scf drops, they’ll be in an even better position as the stock market has soared

In the long-run, yes, home equity appreciation will have a wealth effect. But remember you have to liquidate and sell a home to actually realise the gain.

In the short-term, property is an illiquid asset that doesn't really add to realisable wealth.

A home is more than just a financial asset.

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So it all goes back to the original point, which is that median "real" wealth in the US has actually declined.

 

[chgough34]

Yes. Based on the Fed SCF data, the article stated a $10K decline in median household wealth, if you exclude property wealth increases.

Yeah and if you exclude property and stocks, median wealth has increased. And excluding property wealth is silly

Plus we haven't even considered inflation yet. In the 3 year period from 2020-2022, inflation has been a cumulative 14%. That further emphasises

The SCF is inflation adjusted

And how often does one do a Zillow estimate?
If you don't do one for 2years, then the average homeowner doesn't realise it's increased by that much.

The Fed is doing the Zillow estimate for the survey responders

Plus would you really trust the figure that comes out, since you can't realise the gain?

No? Corporate balance sheets list the estimated market value of illiquid assets all the time

In the long-run, yes, home equity appreciation will have a wealth effect. But remember you have to liquidate and sell a home to actually realise the gain.

In the short-term, property is an illiquid asset that doesn't really add to realisable wealth.

The wealth effect is the tendency to spend more if there’s appreciation of asset values. And the fact that an asset is illiquid doesn’t mean it can’t be put on a balance sheet, especially since housing isn’t even that illiquid given every bank has a HELOC

A home is more than just a financial asset.

But it is a financial asset

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So it all goes back to the original point, which is that median "real" wealth in the US has actually declined.

Yes. That’s entirely driven by declines in stock prices. And thus, U.S. households are doing incredibly well