It’s the old story of the rich getting richer & the poor getting poorer. Even though the average living standards have increased considerably in recent times, the distribution of wealth has become more skewed. One percent of the richest people own 40% of the world’s wealth, while the bottom 50% of the world’s adult population own barely 1% of the wealth.
In the U. S. alone, the top 1 percent earn as much as the bottom 33%, which is equivalent to over 100 million people. While the U. S. economy has grown approximately 160% over the last 30+ years, the top 1% saw their income levels rise 250%. During that same period, the bottom 90% actually saw a drop of 11% in their average income. These are astounding figures and the wealth distribution disparity continues to widen.
Home equity is a very important form of wealth for most households. Only about half of those in the bottom quarter of the income distribution own their homes, while 88.9% in the top quarter do own their homes. Household debt has consistently trended upward, and it was over 130% of disposable income in ’05. As expected, this disproportionately plagues lower-income families moreso and attributes to about a fifth of their income and upwards of 40% for many.
Many and especially the middle class have been utilizing the equity in their homes for continued consumer spending – vacations, vehicles, remodeling, etc. – while salaries have not increased at the same level. The problem is that the equity is running out with lower home prices equating to lower household wealth.
This greater disparity has to affect us as realtors. Each and every day we are shutting more and more people out of homeownership. I’ve been saying this for years. Here in Central Florida we’ve been mostly a service-oriented industry. As prices were rising within the last several years and even before then, we’ve daily locked more and more people out of the market. Our appreciation was approximately 12-13% a year before the last couple of boom years hit. Yes, that has been much better than the national average of approximately 8% per annum.
It is widely believed that one of the main ways to address this gap between the have and have-nots is to improve education and training. But this is not something that can just happen overnight. Our education system has been failing us, but it goes way beyond that to the familial system.
Can this trend possibly be reversed through social and economic policies? This further leads to the question that if such reforms are possible, are they either practical or feasible? I don’t know what the answer is or even if there is one. But that doesn’t mean that we should just forget or ignore that this is occurring to the fabric of our society.
Till next time...Marc It Sold!