selank
8
Feb

Middleclass-What Middleclass

   Posted by: chris   in Fish Talk

Not so very long ago it took one decent income to support a family including paying a mortgage, then as time evolved it took two incomes to pay the same mortgage, now we have reached a stage where it takes two incomes and low interest rates to pay the average family home mortgage.

Time was in the mid eighties to early nineties interest rates fluctuated from 9% to 18%, today we have home loan rates in the fours.

The question that arises is will-could interest rates ever approach 1980 levels again, if they did there would be Armageddon in the economy which would make the current foreclosure crisis look like a cloudy day at the beach compared to a tsunami.

Principle and interest on a $200K mortgage at 4% is $596.77

Principle and interest on a $200K mortgage at 8% is $917.21

Principle and interest on a $200K mortgage at 12% is $1,285.77

Math note* 596 is .43 of 1,285

So if for some unknown reason like an Israeli strike on an Iranian nuclear facility interest rates where to rise to 12% a $500,000.00 home would be worth $230,000.00

Literately every home in America would be underwater, refinancing would be impossible and new home purchase would be a financial impossibility for everyone except the 1% who would be all cash buyers.

This is a ticking time-bomb that no one wants to acknowledge. But sooner or later America will be forced to come to terms with the scary fact that we are no longer a world economic superpower.

And when you are not the controller of the worlds economy you become subject to the actions of others and not the master of your own fate.

If and when interest rates escalate the American dream of home ownership will suffer a Nagasaki type event. But the worst might still be to come if the shock waves of collapsing house values brings down the economy and capitalism with it. We are looking at a depression that could supersede the Great Depression many times over.

The house that Uncle Sam built is now on a very uncertain foundation.

 

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This entry was posted on Wednesday, February 8th, 2012 at 2:44 pm and is filed under Fish Talk. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

2 comments so far

eddie
 1 

Back when one parent made enough to support a family homes were more modest, healthcare more primitive, recreation much simpler. If one cancels the cable,Internet and moves to a 3 bed 1 bath home one income can cover it.

February 17th, 2012 at 1:38 am
eddie
 2 

The true culprit is the one who smiled after getting one past the mortgage officer and whining four years later that he was swindled.

March 12th, 2012 at 1:22 am

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