NEW YORK (AP) -- There's no need to wait for a government bailout of the distressed banking system. The Federal Reserve has already begun doing so.
While much of the focus among investors has been on what the Fed will do with short-term interest rates, the central bank quietly began tinkering with its own rules in August to infuse billions of dollars of liquidity into a marketplace paralyzed by the intensifying credit crisis.
That change allowed bank holding companies to potentially gain access to depositor-insured funds that previously had been largely walled off from being used by the companies' riskier broker-dealer units.....
the Fed went even further and is catching some flack for its separate decision to waive a rule intended to prevent banks from making large loans to the broker-dealer units affiliated with their parent companies.
That rule, section 23A of the Federal Reserve Act, had been set up to protect a bank from losses that might occur in a broker affiliate by restricting the amount of "covered transactions" between the two to 20 percent of the bank's capital and surplus. Such limits are intended to protect the capital of the bank and its depositors, even if it means that a company's non-bank units or the parent company is decapitalized or fails, according to Christopher Whalen, managing director at Institutional Risk Analytics.
But in late August, the Fed allowed Bank of America, Citigroup and JPMorgan Chase to extend up to $25 billion, or up to around 30 percent of each bank's regulatory capital, to their broker-dealer affiliates, which are running into trouble now that there is no market for certain credit products....
The Fed's rule change essentially lets the three large banks lend more to their broker-dealer affiliates. The loans must be guaranteed by the parent companies, have to be marked to current market rates every day and are subject to daily margin-maintanence requirements....
But the Fed's move has also been met with criticism from those who say it could put the banks' depositor-insured funds at risk should the market really tank. They also argue that it gives a break to the same people who helped get us into this credit mess in the first place.
"This is moral hazard of the first order," said Nouriel Roubini, a professor of economics at New York University's Leonard N. Stern School of Business and chairman of the consulting firm Roubini Global Economics. "The Fed is saying 'We will not punish you for what you have done. We will provide you with access to liquidity.' "
That certainly sounds like a bailout -- even if the Fed won't say so.
NEW YORK (CNNMoney.com) -- Merrill Lynch stock jumped Friday amid speculation that Chief Executive Stanley O'Neal may be on his way out and that the brokerage firm could become a takeover target. Merrill shares climb on CEO, takeover talk - Oct. 26, 2007
OT -- Banker, may I please buy a daypass to the Bankerdome? I'm irritated that vapid comments (CFC conference call) and vacuous 'news' (O'Neal's impending ouster) moves the market higher (or, provides cover for the Treasury/I-bank cabal).
I'm not pulling my SDS bet. But, I may quit watching the ticker until someone tells me it is 'red.
Sorry jg, I'll try to curb my enthusiasm . You're right, we need to turn down the signal to noise ratio. Too many people are sitting around waiting for the other shoe to drop and a person gets trigger happy for any rumor when that happens.
I've got a great idea to solve the excess inventory problem and boost the SoCal economy at the same time.
SoCal could export the Santa Ana Winds to the rest of the country, which will "work off" a lot of that excess inventory. It's already done wonders "working off" inventory near San Diego.
Or how about this: bring in "guest workers" to fill excess inventory...
The Vacancy Rates are NOT stable if you count the speculators held units.
I'm sorry. I missed that line. Where in the Census report are the speculator held units listed?
What I do see is rental vaccancy rates statistically flat for 4 years. What I do see is homeowner vaccancy rates up less than 1% from multiyear averages. What I see is total housing stock tracking population growth for the last year.
Make no mistake. The number of unoccupied dwelling units will skyrocket in coming quarters but using this press release to show that is crying wolf.
OK, I hereby declare myself one of the dumb ones who hold stocks big time.
Regarding CR's post this is really interesting. Here in the Phoenix market (I finally found the local multi-housing unit reports), the y-o-y rents are up ~4%, but the vacancy rate went up in Q3 vs. Q2 because of repartment conversions. This seems a lot more significant vs. the national average. Also, a few big apartment complexes came on stream.
CR's chart, however, could suggests it's a good time to invest in apartment buildings as the rental vacancy rate trends down in a RE downturn, with these downturns lasting for years.
Jas, I've pointed out before that my estimate could be a little low - no big deal. Shilling's estimate of the overhang is around 2 million units - I think that is too high.
If you are correct about even more hidden inventory, then we should see another major spike in the homeowner vacancy rate (like to 3.5% or 4%) next year. I don't think so, but we will see.
"Jas, I've pointed out before that my estimate could be a little low - no big deal. Shilling's estimate of the overhang is around 2 million units - I think that is too high."
Hasn't Prof. Shilling been forecasting a recession since 2004 as well?
This is as good a thread as any to mention this, it's been rolling around in the transom of my mind for awhile.
Anyone here old enough to remember when televisions and cars were generally one-to-a-household items? As they became more affordable and Americans became wealthier those items became more-than-one-to-a-household items.
A lot of housing data we see not only isn't adjusted for population. It's also not adjusted for changes in household income or changes in the needs/desires of homeowners.
My point is that without taking those factors into account the argument that "there's too much housing supply" isn't as much a slam-dunk as it appears.
More people than ever before can afford second homes, and as homeowners' requirements/desires change more people want (and can afford) larger homes with newer construction. The 1940's vintage 1,200 square-foot house that my family used to be comfortable in wouldn't be nearly as comfortable as the modern-construction, 2,000+ square-foot home we're in now...with 3 cars and two televisions.
"Anyone here old enough to remember when televisions and cars were generally one-to-a-household items? As they became more affordable and Americans became wealthier those items became more-than-one-to-a-household items."
Although it is high treason on this blog, this is one of the best thoughts on this matter in a long time.
And refreshingly different from the "high housing inventory leads to Great Depression" chorus.
Yes Sebastian, and one of the things we know is that one of the big changes in desires is that hoards of young people who in the past would not have thought of buying a home -- and who when they finally thought of buying one would have had to wait until they had saved up a 10% or 20% down payment and established creditworthiness to the standards of someone like Tanta -- were in this bubble allowed and encouraged to buy with little or no down payment using mortgages provided with ludicrously lax standards.
The effect of this was to drive the home ownership rate among the young to record levels (even above the peak at the end of the last lunatic RE bubble in the '70s), which in itself helped to fuel the spiraling prices and reinforce the myth that "you gotta buy now or be priced out forever".
As these young people are foreclosed upon, financially wiped out, and have to move back in with their parents or become roommates, the movie will be played in reverse. Most importantly, not only those people and their contemporaries, but also their younger friends, cousins and siblings will see that "gotta buy now or be priced out forever" was a myth. And as happened after the '70s bubble peak, home ownership among the young will fall back towards it record lows.
Seb excellent point. I've been batting around the idea for a while that there has also been a paradigm shift in what people think is a reasonable percent of their income to contribute to housing. Add these two together and it provides quite a different vantage point...
When those ARMs reset those people will be looking at spending even more of their income on housing if their rates are based on Libor (which seems to be somewhat reluctant to behave).
I'm with you on that. If they cant pay a completely amortizing payment then they are in trouble. I'm more referencing the creep from 28% of income towards housing to 35% towards housing.
Libor isnt going to behave anytime soon. The world is now telling us that the fed isnt in charge of the international overnight rate anymore... This is the same world that is whispering (SCREAMING) in our ear that our dollar sucks so it might just be that they are angry our bonds and cdos haven't preformed particularly well...
I'm just waiting until oil is quoted in Euro's. They I'm sure this whole thing is over....
After the recovery, whenever it comes, these currently unpurchasable new construction albatrosses are going to be golden.
I was once in a finance class where the professor explained to us how the founder of a new golf course often goes belly up from overleverage before the lucky second owner reaps revenues that would have dwarfed the poor founders expenses. General topic was cramdown on initial investors.
Sorry, but many people "bought" those "affordable" second homes using toxic loans. They couldn't really afford them, not in reality.
I have heard people tell me that the 1/3 of your income rule to housing is "outdated." That new notion is simple impractical and is based upon the "nothing bad every happens to me or happens here" rule. Yeah, you can burn 50% to 60% of your gross income on a big, empty (because you can't afford furniture) Mcmansion. Oh, and then your car breaks down, you have a medical expense, you lose your job, etc. Oops - I guess you lose the house, too, because you overbought.
The 1/3 income rule existed for a reason - it assumed the chances of something bad happening to the person so that they could still make payments even then. But in "happy land" of the modern marketplace, everything always goes up and everything is perfect - until it isn't.
Considering declining wages, vanishing jobs, skyrocketing inflation, and non-existent pensions, benefits, etc. it seems logical to spend LESS than 1/3 of your gross income on housing because most of the social safety net that existed when that rule was established (jobs, pensinos, etc.) has been intentionally destroyed.
--
Cote: "I'm sorry. I missed that line. Where in the Census report are the speculator held units listed?"
Just because there is no separate category for vacancy rates other than homeowners and rentals doesn't mean that other forms of vacancies dont exist.
THAT IS WHY IT IS IMPORTANT TO LOOK AT THE VACANT UNITS AND OCCUPIED UNITS.
Everyone knows that speculators bought at least 1/3rd of the units during 2004-06. How many of them are occupied? And aren't lenders-owned units lot higher today than a year ago and are they mostly occupied of vacant?
"Name" writes that Sebastion wins this round. because After the recovery, whenever it comes, these currently unpurchasable new construction albatrosses are going to be golden.
But Sebastian's comment claimed that the argument that "there's too much housing supply" isn't a slam-dunk, one of his reasons being that "more people than ever can afford second homes".
He's not talking about what's going to
happen in the ultimate recovery -- he's still pooh-poohing the idea that there's going to be a severe bust.
O-Joe, are you somehow trying to comapre TVs to houses? If so, you're really an idiot. And btw, moving the goal posts in your previous comment fooled no one.
The Vacant Units ARE at ALL TIME HIGH at 17.89M. They are up 1.3M!!!!! Is this so hard to grasp?
Jas
Jas Jain
Kinda
If the units were in desirable places like 15cpw, Jupiter or Kailua , then i would expect rental rates to come in ..
but i think these units are off in Ultra-suburbua, where cheap rental's are the least of ones worries..
that's why it's hard to grasp.
Journeyman said: "And if 2400 sq. ft. is comfortable is 4800 sq. ft. twice as comfortable? Is it necessary?"
Hey, I hear you and understand the argument. Does a family really need even 2,000 square feet? Does anyone need to drive anything larger than a Smart-Car? Why is there an entire industry built on the idea of charging more for a single cup of coffee than it would cost to make a whole pot? And what's up with cellphones? (I refuse to own one, myself.)
But what people need and what people want (and are willing to pay for) are very different things. Huge, successful, and sustainable industries have been created by supplying people with things they don't actually need...then those things that nobody actually needs eventually turn into things that are considered basic must-haves.
Actually the rule was one week's pay (25%) for the mortgage (or twice annual income - an alternative rule of thumb) until inflation began in the mid-70's. I suspect the change was driven in part by spouses going to work - 60% remaining of two incomes was more (often considerably) than 75% remaining of one income. Part of today's problem may be that inflation over the last 30 years has eroded the advantage of two income families although I cannot quantify the imbalance between inflation and income growth. It seems from a distance (I am retired) that two incomes are now required for what was a one income standard of living especially when you consider the loss and/or rising costs of benefits.
I think just looking at the income without looking at expenses does not make sense. Some people are more frugal than others. They can easily go up 1/2 income on their housing costs. On the other hand if they are spendthrifts, they might not be able to go upto even 1/5 income on their housing costs. What I am trying to say is one size does not fit all, and looking at just income without look at expenses does not make sense.
MK
--
The Vacancy Rates are NOT stable if you count the speculators held units. That is the blind spot.
The Vacant Units ARE at ALL TIME HIGH at 17.89M. They are up 1.3M!!!!! Is this so hard to grasp?
Jas
"These excess units will keep pressure on housing starts for some time."
Uneven pressure. Lots and lots of pressure in the bubble areas, not so much in regions where the overbuilding wasn't so extreme.
AP,today:
NEW YORK (AP) -- There's no need to wait for a government bailout of the distressed banking system. The Federal Reserve has already begun doing so.
While much of the focus among investors has been on what the Fed will do with short-term interest rates, the central bank quietly began tinkering with its own rules in August to infuse billions of dollars of liquidity into a marketplace paralyzed by the intensifying credit crisis.
That change allowed bank holding companies to potentially gain access to depositor-insured funds that previously had been largely walled off from being used by the companies' riskier broker-dealer units.....
the Fed went even further and is catching some flack for its separate decision to waive a rule intended to prevent banks from making large loans to the broker-dealer units affiliated with their parent companies.
That rule, section 23A of the Federal Reserve Act, had been set up to protect a bank from losses that might occur in a broker affiliate by restricting the amount of "covered transactions" between the two to 20 percent of the bank's capital and surplus. Such limits are intended to protect the capital of the bank and its depositors, even if it means that a company's non-bank units or the parent company is decapitalized or fails, according to Christopher Whalen, managing director at Institutional Risk Analytics.
But in late August, the Fed allowed Bank of America, Citigroup and JPMorgan Chase to extend up to $25 billion, or up to around 30 percent of each bank's regulatory capital, to their broker-dealer affiliates, which are running into trouble now that there is no market for certain credit products....
The Fed's rule change essentially lets the three large banks lend more to their broker-dealer affiliates. The loans must be guaranteed by the parent companies, have to be marked to current market rates every day and are subject to daily margin-maintanence requirements....
But the Fed's move has also been met with criticism from those who say it could put the banks' depositor-insured funds at risk should the market really tank. They also argue that it gives a break to the same people who helped get us into this credit mess in the first place.
"This is moral hazard of the first order," said Nouriel Roubini, a professor of economics at New York University's Leonard N. Stern School of Business and chairman of the consulting firm Roubini Global Economics. "The Fed is saying 'We will not punish you for what you have done. We will provide you with access to liquidity.' "
That certainly sounds like a bailout -- even if the Fed won't say so.
OT - And I hate to waste a first or near first post on this stuff.. Oh well.
Big three credit-raters subpoenaed
Connecticut AG Richard Blumenthal investigates possible anticompetitive tactics at S&P, Moody's and Fitch.
Business, financial, personal finance news - CNNMoney.com
NEW YORK (CNNMoney.com) -- Merrill Lynch stock jumped Friday amid speculation that Chief Executive Stanley O'Neal may be on his way out and that the brokerage firm could become a takeover target.
Merrill shares climb on CEO, takeover talk - Oct. 26, 2007
For sale: 2 million empty homes
Number of vacant homes on the market nationwide equivalent to all homes in Detroit; another sign of weak housing market.
New sign of housing weakness: Vacant homes on market up - Oct. 26, 2007
Heh.. edited things too long it seems.
Sorry for the repost, but it is important to people who bank through these entities.
OT -- Banker, may I please buy a daypass to the Bankerdome? I'm irritated that vapid comments (CFC conference call) and vacuous 'news' (O'Neal's impending ouster) moves the market higher (or, provides cover for the Treasury/I-bank cabal).
I'm not pulling my SDS bet. But, I may quit watching the ticker until someone tells me it is 'red.
Sorry jg, I'll try to curb my enthusiasm . You're right, we need to turn down the signal to noise ratio. Too many people are sitting around waiting for the other shoe to drop and a person gets trigger happy for any rumor when that happens.
So Homeowner Vacancy rates are only CLOSE to 50 year highs. Great...
So is it program trades or the PPT that took the Dow up 40pts at 2:00 ?
I say 50bps cut, the junkie can't cut down on its ration.
--
Homeownership at four year low!
Smart people started to sell in 2006 and continue to.
Stupid people couldn't wait to buy at any price during 2004-06.
Bubbles are good times to separate the stupid from the smart.
What are stupid people buying and smart people unloading? Scams, aka stocks.
Jas
I've got a great idea to solve the excess inventory problem and boost the SoCal economy at the same time.
SoCal could export the Santa Ana Winds to the rest of the country, which will "work off" a lot of that excess inventory. It's already done wonders "working off" inventory near San Diego.
Or how about this: bring in "guest workers" to fill excess inventory...
Just trying to think outside the box...
--
How about the vacancy rate and total number of lenders-owned units? People with too many blind spots can't help but stumble.
To count properly one must count all and not just sub-sets.
Jas
I was wondering how many of those burned out homes will be rebuilt amid the ashes. I mean, it was probably lovely once upon a time, but...
The Vacancy Rates are NOT stable if you count the speculators held units.
I'm sorry. I missed that line. Where in the Census report are the speculator held units listed?
What I do see is rental vaccancy rates statistically flat for 4 years. What I do see is homeowner vaccancy rates up less than 1% from multiyear averages. What I see is total housing stock tracking population growth for the last year.
Make no mistake. The number of unoccupied dwelling units will skyrocket in coming quarters but using this press release to show that is crying wolf.
OK, I hereby declare myself one of the dumb ones who hold stocks big time.
Regarding CR's post this is really interesting. Here in the Phoenix market (I finally found the local multi-housing unit reports), the y-o-y rents are up ~4%, but the vacancy rate went up in Q3 vs. Q2 because of repartment conversions. This seems a lot more significant vs. the national average. Also, a few big apartment complexes came on stream.
CR's chart, however, could suggests it's a good time to invest in apartment buildings as the rental vacancy rate trends down in a RE downturn, with these downturns lasting for years.
No need to hurry, though.
O-Joe
Jas, I've pointed out before that my estimate could be a little low - no big deal. Shilling's estimate of the overhang is around 2 million units - I think that is too high.
If you are correct about even more hidden inventory, then we should see another major spike in the homeowner vacancy rate (like to 3.5% or 4%) next year. I don't think so, but we will see.
Best to all.
"Jas, I've pointed out before that my estimate could be a little low - no big deal. Shilling's estimate of the overhang is around 2 million units - I think that is too high."
Hasn't Prof. Shilling been forecasting a recession since 2004 as well?
O-Joe
This is as good a thread as any to mention this, it's been rolling around in the transom of my mind for awhile.
Anyone here old enough to remember when televisions and cars were generally one-to-a-household items?
As they became more affordable and Americans became wealthier those items became more-than-one-to-a-household items.
A lot of housing data we see not only isn't adjusted for population. It's also not adjusted for changes in household income or changes in the needs/desires of homeowners.
My point is that without taking those factors into account the argument that "there's too much housing supply" isn't as much a slam-dunk as it appears.
More people than ever before can afford second homes, and as homeowners' requirements/desires change more people want (and can afford) larger homes with newer construction. The 1940's vintage 1,200 square-foot house that my family used to be comfortable in wouldn't be nearly as comfortable as the modern-construction, 2,000+ square-foot home we're in now...with 3 cars and two televisions.
Sebastia
"Hasn't Prof. Shilling been forecasting a recession since 2004 as well?"
Perhaps
And others have said we would never get to where we are.
Which nets to what? Nothing?
And if 2400 sq. ft. is comfortable is 4800 sq. ft. twice as comfortable? Is it necessary?
Sebastian:
"Anyone here old enough to remember when televisions and cars were generally one-to-a-household items?
As they became more affordable and Americans became wealthier those items became more-than-one-to-a-household items."
Although it is high treason on this blog, this is one of the best thoughts on this matter in a long time.
And refreshingly different from the "high housing inventory leads to Great Depression" chorus.
O-Joe
Journeyman:
We can consider Prof. Shillings forecasts as too bearish in general, that's what I postulate. CR's forecast may be more realistic.
O-Joe
Yes Sebastian, and one of the things we know is that one of the big changes in desires is that hoards of young people who in the past would not have thought of buying a home -- and who when they finally thought of buying one would have had to wait until they had saved up a 10% or 20% down payment and established creditworthiness to the standards of someone like Tanta -- were in this bubble allowed and encouraged to buy with little or no down payment using mortgages provided with ludicrously lax standards.
The effect of this was to drive the home ownership rate among the young to record levels (even above the peak at the end of the last lunatic RE bubble in the '70s), which in itself helped to fuel the spiraling prices and reinforce the myth that "you gotta buy now or be priced out forever".
As these young people are foreclosed upon, financially wiped out, and have to move back in with their parents or become roommates, the movie will be played in reverse. Most importantly, not only those people and their contemporaries, but also their younger friends, cousins and siblings will see that "gotta buy now or be priced out forever" was a myth. And as happened after the '70s bubble peak, home ownership among the young will fall back towards it record lows.
Seb excellent point. I've been batting around the idea for a while that there has also been a paradigm shift in what people think is a reasonable percent of their income to contribute to housing. Add these two together and it provides quite a different vantage point...
ades,
When those ARMs reset those people will be looking at spending even more of their income on housing if their rates are based on Libor (which seems to be somewhat reluctant to behave).
Journeyman,
I'm with you on that. If they cant pay a completely amortizing payment then they are in trouble. I'm more referencing the creep from 28% of income towards housing to 35% towards housing.
Libor isnt going to behave anytime soon. The world is now telling us that the fed isnt in charge of the international overnight rate anymore... This is the same world that is whispering (SCREAMING) in our ear that our dollar sucks so it might just be that they are angry our bonds and cdos haven't preformed particularly well...
I'm just waiting until oil is quoted in Euro's. They I'm sure this whole thing is over....
Sebastion wins this round.
After the recovery, whenever it comes, these currently unpurchasable new construction albatrosses are going to be golden.
I was once in a finance class where the professor explained to us how the founder of a new golf course often goes belly up from overleverage before the lucky second owner reaps revenues that would have dwarfed the poor founders expenses. General topic was cramdown on initial investors.
Sorry, but many people "bought" those "affordable" second homes using toxic loans. They couldn't really afford them, not in reality.
I have heard people tell me that the 1/3 of your income rule to housing is "outdated." That new notion is simple impractical and is based upon the "nothing bad every happens to me or happens here" rule. Yeah, you can burn 50% to 60% of your gross income on a big, empty (because you can't afford furniture) Mcmansion. Oh, and then your car breaks down, you have a medical expense, you lose your job, etc. Oops - I guess you lose the house, too, because you overbought.
The 1/3 income rule existed for a reason - it assumed the chances of something bad happening to the person so that they could still make payments even then. But in "happy land" of the modern marketplace, everything always goes up and everything is perfect - until it isn't.
Considering declining wages, vanishing jobs, skyrocketing inflation, and non-existent pensions, benefits, etc. it seems logical to spend LESS than 1/3 of your gross income on housing because most of the social safety net that existed when that rule was established (jobs, pensinos, etc.) has been intentionally destroyed.
--
Cote: "I'm sorry. I missed that line. Where in the Census report are the speculator held units listed?"
Just because there is no separate category for vacancy rates other than homeowners and rentals doesn't mean that other forms of vacancies dont exist.
THAT IS WHY IT IS IMPORTANT TO LOOK AT THE VACANT UNITS AND OCCUPIED UNITS.
Everyone knows that speculators bought at least 1/3rd of the units during 2004-06. How many of them are occupied? And aren't lenders-owned units lot higher today than a year ago and are they mostly occupied of vacant?
Jas
"Name" writes that Sebastion wins this round. because
After the recovery, whenever it comes, these currently unpurchasable new construction albatrosses are going to be golden.
But Sebastian's comment claimed that the argument that "there's too much housing supply" isn't a slam-dunk, one of his reasons being that "more people than ever can afford second homes".
He's not talking about what's going to
happen in the ultimate recovery -- he's still pooh-poohing the idea that there's going to be a severe bust.
He doesn't win this round, either.
Was sure I'd turned italics off ...
O-Joe, are you somehow trying to comapre TVs to houses? If so, you're really an idiot. And btw, moving the goal posts in your previous comment fooled no one.
The Vacant Units ARE at ALL TIME HIGH at 17.89M. They are up 1.3M!!!!! Is this so hard to grasp?
Jas
Jas Jain
Kinda
If the units were in desirable places like 15cpw, Jupiter or Kailua , then i would expect rental rates to come in ..
but i think these units are off in Ultra-suburbua, where cheap rental's are the least of ones worries..
that's why it's hard to grasp.
Journeyman said: "And if 2400 sq. ft. is comfortable is 4800 sq. ft. twice as comfortable? Is it necessary?"
Hey, I hear you and understand the argument. Does a family really need even 2,000 square feet? Does anyone need to drive anything larger than a Smart-Car? Why is there an entire industry built on the idea of charging more for a single cup of coffee than it would cost to make a whole pot? And what's up with cellphones? (I refuse to own one, myself.)
But what people need and what people want (and are willing to pay for) are very different things. Huge, successful, and sustainable industries have been created by supplying people with things they don't actually need...then those things that nobody actually needs eventually turn into things that are considered basic must-haves.
Sebastia
The 1/3 income rule existed for a reason
Actually the rule was one week's pay (25%) for the mortgage (or twice annual income - an alternative rule of thumb) until inflation began in the mid-70's. I suspect the change was driven in part by spouses going to work - 60% remaining of two incomes was more (often considerably) than 75% remaining of one income. Part of today's problem may be that inflation over the last 30 years has eroded the advantage of two income families although I cannot quantify the imbalance between inflation and income growth. It seems from a distance (I am retired) that two incomes are now required for what was a one income standard of living especially when you consider the loss and/or rising costs of benefits.
The 1/3 income rule existed for a reason:
I think just looking at the income without looking at expenses does not make sense. Some people are more frugal than others. They can easily go up 1/2 income on their housing costs. On the other hand if they are spendthrifts, they might not be able to go upto even 1/5 income on their housing costs. What I am trying to say is one size does not fit all, and looking at just income without look at expenses does not make sense.
MK