nick: I think one missing part of the story is the positive effect of inflation on mortgage holders, coupled with the hot housing market.

I’m sorry, this is more than “a caveat,” it’s actually the whole story.

This entire story is a perfect example of how economic reporting has missed the story. They interview one (1) working class woman who has been legitimately screwed by her employer ($1/hr raise in 5 years) and then note that wages for working people in the aggregate have outpaced inflation!

Again, the conceit of the piece is perfectly reasonable, as is some of the reporting, but if you scratch it, you see the actual data belies the thesis. www.nytimes.com/2024/07/03/b...

America’s Divided Summer Economy Is Coming to an Airport or Hotel Near Youwww.nytimes.com The gulf between higher- and lower-income consumers has been widening for years, but it is expected to show up especially clearly in travel this season.

There’s testable hypothesis here and I’m willing to make a prediction: choice an empirical metric to measure low and middle income people taking summer trips and I will bet they are up YoY when summer is over.

Again, none of this is to say American capitalism is awesome for working people, it manifestly is not! But we’re talking about change vs constants. And the *trends* have been more money in the pockets of lower wage earners, in real terms, over the past two years.

I think one missing part of the story is the positive effect of inflation on mortgage holders, coupled with the hot housing market.

I kind of feel like it’s a wash? Sure you can sell your home, but where will you move? Plus it only benefits homeowners

There are 86 million homeowners. Rapid inflation, assuming your income keeps pace, absolutely helps reduce the mortgage burden, no wash about it. If money doubles, your mortgage halves. Renters do not get this benefit. This causes a disparity and could account for the vibecession.

This is anecdotal, but in my experience, homeowners aren’t the ones feeling down about the economy; it’s us renters who keep seeing the possibility of owning a home slip through our fingers. I’m convinced it’s never going to happen. No way I can save faster than price increases. The game is fixed.

yes, exactly. this is a key point being missed in the vibecession debate. rent control and tenant protections are a huge help, but most renters don't have that, and they're getting double-hit from inflation and a housing shortage.

Yeah, precisely. My rent is 40% of my income. A down payment for a house out here is $100k+. Wages outpacing inflation by a few % points (which mine didn’t, btw) would do diddly squat to improve my future prospects. I’ll be renting until I die, and probably never be able to retire 😕

FWIW, there are MANY countries where one can live reasonably well on a straight Social Security income. I expect that a lot of GenXers who are permanently shut out of owning a home will find this a better option than working til they die or retiring by living out of their cars or tents.

There are several markets where owning a house is difficult even for the upper middle class. NY, LA, SF, DC. This is true now. And it was true 20 years ago. But there are many many places where this is not true.

Are all the houses around you almost 3 million dollars or are we doing that thing where we pretend you can’t get a house without 20% down?

totally, and this is place where the aggregate data *does* show a grim scene, it's not just anecdotal. I'd say the cost of housing is probably the single biggest economic issue right now (along w high interest rates on credit card debt)

This is clearly an urban/coastal issue. My students, when they graduate college, are all buying homes in the Midwest within 5 years of graduating. I see their posts about all the time.

Yes but rents are bad everywhere. It’s basically the key driver of inflation in the CPI data, and obviously 7% mortgage rates make home purchasing more expensive as well (although asking prices tend to move to accommodate that a bit)

How many are getting help from their families for the downpayment and closing costs?

I am not certain it is purely coastal verse middle. I live in rural AL and my 1275 sq. ft. home was 100K in 08 at bottom of the market now it is 199K and on my salary I could not afford a single home at 7%. I make way more than I did in 08. Average prices are now 2-2.5x more here salaries are x1.5.

Not to get TOO contrarian, but how many are NOT posting about buying a home because they couldn’t buy one? Like, you’re guaranteed to see the posts about people buying a home because only those buying them are posting about it. There’s a term for this but I can’t remember it right now… 🤔

Gently guide them to Oklahoma, we need more young blue voters.

The urban and coastal areas are where most Americans live. Supply and demand. Location, location, location.

wages haven't matched inflation(price gouging) in decades.

How many of them are people and not companies that were counting on this shit from the start?

“Assuming your income keeps pace” is the key to your point. Actually converting the upside on your home into “real” money you can use for other things means downsizing or moving to a lower cost of living area. HELOC doesn’t count in my mind because it is just access to more debt near term.

This is why I argue that the higher interest rates are actually INCREASING home values, because who wants to move from their home that has a 3% mortgage and buy into a more expensive home at 7%? Cut interest rates, and more supply will come into the market. Why doesn't the Fed get this?

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