Acquiring a property is one of the pillars of the American dream, which involves access to opportunities for greater prosperity. However, the current economic conditions in the U.S. and policy decisions have undermined this desire and have worse, limited the ability of young strata to achieve a standard of living higher than their predecessors.
The deteriorating labor sector after the economic crisis of 2008 and 2009 was overwhelming and there are few signs of consistent recovery to date. In October 2009, the highest number of unemployed in the past 13 years was recorded, reaching 15.4 million. Subsequently, the figure stood at 10.4 million in March 2014. However, this month to 7.96 million work places losses were exceeded during the crisis (IV Qtr. Trim 07 to II. 09), reaching a cumulative 8.1 creation million jobs.
These figures are due to two phenomena, namely: a lower intention to hire private sector human capital, which also affects less average working hours and the stagnation of real wages and a drop in the population's incentives to join the labor force (participation rate at a record low of 63.2 percent).
These elements are a constant signal to the public about the vulnerability of their source of income, which directly affects the consumption of durable goods. However, the impact has a greater depth in the middle-income strata, as well as young people and their educational training decision, given the difficulty of achieving a better economic condition at present.
The real estate situation reflects the weakness of the average consumers: home sales levels remain 5.04 million, similar to those observed in 2008 Additionally, increased financial costs has intensified stagnation..
According to the capacity index real estate purchase, prepared by the National Association of Realtors, the proportion of the monthly payment on a standard credit increased to 14.4% of the national median family income, from 11.7% in January 2013, which implies an increase of $ 7.536 in the need for a middle class family for a mortgage loan, as a result of higher mortgage interest rate benchmark since July 2013 (+124 basis points) monthly salary.
Market conditions do not point to a better outlook in the short term, in the first instance, by the start of tapering, which will undoubtedly affect the cost of long-term financing (mainly mortgage and student). Recently, a new element was integrated: the reform proposal Johnson-Crapo, which raises the demise of Fannie Mae and Freddie Mac, the mortgage agencies of the U.S. government guarantees.
While the lack of prudential supervision in the risk assessment in these institutions was an important factor in the mortgage crisis of 2008, it is clear that they are part of a system of protection for consumers means that lessens the financial costs, allows for schemes fixed rate long-term, while adding flexibility and risk management, which has also allowed the homeownership rate nationwide has increased from 44% in 1940 to 65% in 2014, and debt mortgage represents 59% of GDP (one of the largest mortgage industry insights globally).
Therefore, poor regulatory enforcement could further raise interest rates on loans and promote the deterioration of the real estate sector (about 40 and 50 basis points, according to Moody's Analytics), to jeopardize the growth of sales sector and the borrowing capacity of consumers (in consideration of a current high level of leverage).
The potential vulnerability of one of the pillars that have enabled the consolidation of the American middle class is high, with the reconfiguration of the system of market prices (including interest rates) and with it, the change in incentives consumers. Monetary authorities and Congress will have to weigh their decisions under the responsibility of affecting the growth engine of the world's largest economy.