Calculated Risk updates with the latest Kennedy-Greenspan numbers for Home Equity Withdrawal (aka Home Equity Loans).
From a high in 2005-2006 of nearly 10% of disposal household income (think about that for a second), we now see 0.3% in the last quarter. This is a massive change in domestic consumer spending. In my view, unemployment isn't the only indicator one should look at to understand recession.
A second thing that's been rattling around my head for a while: I'm wondering actually if college costs (which have been greatly outpacing inflation) will run into the same housing-price wall? I expect many parents sending kids to college in the last few years have paid for it via Mortgage Equity Withdrawal. Someone with real data should run those numbers.
College costs are a complicated can of worms. Many private universities have been aggressively raising their prices while turning around and giving out generous scholarships and other forms of financial support. (Gosh, look at what a bargain we're getting! 50% off!) Public schools have been suffering from cuts in state financing, so unsurprisingly their tuitions have gone up to compensate. No surprises there.
ReplyDeleteAt least for selective schools, I don't think there's any danger of prices dropping. What's more likely to happen is that the student demographics will shift around. Many students who formerly would stretch for private school will instead "settle" for public school. The expensive private schools may shift toward a bimodal distribution, using rich students paying full price to effectively support the tuition of low income students, leaving the middle to go elsewhere.
Of course, if the credit markets stay bonkers, college loans could go poof. That would change everything in a big hurry. Right now, a starting medical school student is gambling that they'll have a big enough income on the other side to pay off a staggering debt. If they're not even allowed to make that gamble...