Pew Research report: Middle class had "worst decade in modern history"

http://www.chicagotribune.com/business/breaking/chi-report-us-middle-class-has-worst-decade-in-modern-history-20120822,0,4005682.story

Since 2001, median household income has fallen from $72,956 to $69,487 in 2010, the report said.

The median household net worth, which is the value of assets minus debt, dropped from $129,582 to $93,150 over the same 10-year period, according to Pew, which analyzed U.S. data along with its own survey of nearly 1,300 adults who consider themselves middle class.


Most people surveyed blame lawmakers, banks and big business.

Report says 52 percent of those polled say Obama's policies would help middle class while 39 percent say they would not; 42 percent say Romney would help and 40 percent say he would not.

 

I think you're going to see a lot of these kinds of stories. The timing is perfect ... the period from late 2000 to late 2010 covers at least two big stock-market selloffs. You combine that with the dramatic drop in housing prices since 2007, you're going to see a big average drop in net worth over that time period (since for most households the two greatest assets are retirement accounts and housing equity). You pick your cut-off points within that interval and you can tell any story you want to tell ... net worth up, net worth down, etc., etc.

 

Aw, c'mon, Creosote. Even this is too sensitive?

 

Hard to say.

Market right now is about 20-25% higher than in 2001.

Housing prices dipped from grotesquely high 2007 highs, but aren't that far off from where they were in 2001. The home I sold last October was far down from its 2007 inflated value but almost exactly at its 2003 value --- and still $90,000 more than I paid for it in 1996.

And how much equity did these people who put almost nothing down ever have in their homes anyway?

Anybody but themselves.

 

You could have a ton of equity with no money down ... if your timing was good. Buy a $200K house with no money down. Market jumps 20% in a year (it happened). Suddenly you have $40K in equity.

 

The revelation to me was in the income -- which is not as susceptible to the bubble phenomenon and, in any case, was (under one political/economic school of thought) said to be part of the economy's expansion and the rising tide lifting all boats.

 

But the survey is looking at the decade as a whole. Not just those who had a lot of equity for a fleeting moment, only to see it disappear just as quickly.

That's true, but perhaps 2001 was just an off-the-charts good period, and 2012 is more back in line. We have a tendency to think of the best times as "the way things should be" instead of what they probably were --- an unusually good time you may not see again for awhile. And then we want to blame somebody for "causing" this good time to revert back to the norm.

I'm curious what the household income for 1990 or 1991 was.

 

Correct. I was speaking more to the general case of how one could have equity without putting much (or anything) down. And to that point, wasn't there a housing run-up right around 2000? We sold and bought right around then and I recall it being a pretty hot market. Not like it got around 2006/2007, but hot nonetheless.

 

www.davemanuel.com/median-household-income.php

 

I think so. I had to get an appraisal when I refinanced to a 10-year mortgage and was surprised at how high it came in.

I think there was an everything run-up around 2000. People felt rich, thought the good times would go on forever, and acted like it with their buying decisions.

 

I wonder how the top 1% of households did during the same period.

 

I started my teaching career in the fall of 2000, with the echoes of the dot-com implosion still rolling o'er the land. So many of my students had been targeting computers/internet careers and just had no clue what awaited them. It didn't help that so many of them really had little interest in/aptitude for that line of work. They'd just always assumed the money was going to come rolling in. In a way it was funny, but in a much bigger way it was sad. I kept trying to tell them, "You know, the ability to put together web pages isn't worth quite so much these days. The people getting jobs now have real business skills." But that's a hard lesson to get across. Experience is a much better teacher of that.