Personal income and housing prices

In our previous post, we said the economy won’t get back to normal until housing prices fall to their “natural level.”

What’s the natural level? Prices must relate somehow to personal income. People can’t, simply can’t, buy houses that cost more than three times their household income. And, given the persistent high unemployment rates, personal income isn’t going to come up to hoped-for levels any time soon.

And why do we have persistent high unemployment rates? Because government – state and national – encourages unemployment. What? Yes, by paying people not to work, they are encouraging people not to “get a job.” This, of course, doesn’t mean the unemployed are not making money by working. They just don’t have a “job.”

Remember Friendly Fred? He was considering taking Social Security early and putting his business earnings in his wife’s name, so he “wouldn’t have to pay taxes on my Social Security.” That is so wrong, from so many points of view, but our point here is that the unemployment figures are almost meaningless. Many people think the figures should be much higher.

We think they should be lower. FF isn’t the only guy we know who is thinking of putting earnings in somebody else’s name. This is the game that people at the lower end of the personal income scale play. Sometimes they cross the [legal] line. Years ago a neighbor how had four or five kids and a wife was arrested and charged with the crime of working. He had “forgotten” to notify the unemployment office of his changed economic status when he got a job. We think he had to pay a fine.

The rules have changed a bit since then. The unemployment people assured us that people who find some work, but have not gotten the job they lost back, can keep the money they earn without losing their benefits if they navigate various hurdles and loopholes.

Meanwhile, they are counted as unemployed or underemployed. If their “benefits” weren’t extended, seemingly out into infinity, they would have found gainful employment months ago. FF, for example, as we mentioned before, quit his excellent and rewarding job just because he wanted to go back to his first love – building.

He has had NO PROBLEM finding work – a white male in his late fifties. The hardest hit segment of the working population.


About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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