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Homeownership Woes Continue As Ownership Rates Reach 13 Year Low

Homeownership fell to 65.9%, according to a recent US Census Bureau report (pdf). This number marks a 13 year low for US homeownership rates.

The chart below represents inflation-adjusted house prices, using data from the Federal Housing Finance Agency house price index.

Housing prices still haven’t stabilized and there is much debate about when that will happen. However, more interesting to me is the discussion surrounding the merits of homeownership and whether or not it has lost its allure.

One of the most notable voices in this discussion is hedge fund manager and author James Altucher. His post “Why I Am Never Going to Own a Home Again” is worth reading.

Of all of Mr. Altucher’s reasons against homeownership it’s diversification that strikes a chord with me.

No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth that any other investment should be.

Long periods of growth in the real estate market (as with any asset class) can make someone immune to the risks they’re taking by over weighting their portfolio. Sometimes it takes a great crisis for people to sober up to this risk.

Homeownership Rate vs. FHFA Price Index via The Enterprise Blog

Chart Credit: The Homeownership Bubble is Still Deflating (CARPE DIEM)

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Chart Showing Owners of US Treasury Debt

Though unlikely, it’s still interesting to see who would need to be paid first in order to avoid a technical default on US debt.

The Big Picture blog has this great chart from Société Générale showing who holds US Treasury debt (see chart below).

Chart from Société Générale showing who holds US Treasury debt

Additionally, here is another source of debt breakdown by total amount held and percentage of total U.S. debt, according to Business Insider:

Hong Kong: $121.9 billion (0.9 percent)
Caribbean banking centers: $148.3 (1 percent)
Taiwan: $153.4 billion (1.1 percent)
Brazil: $211.4 billion (1.5 percent)
Oil exporting countries: $229.8 billion (1.6 percent)
Mutual funds: $300.5 billion (2 percent)
Commercial banks: $301.8 billion (2.1 percent)
State, local and federal retirement funds: $320.9 billion (2.2 percent)
Money market mutual funds: $337.7 billion (2.4 percent)
United Kingdom: $346.5 billion (2.4 percent)
Private pension funds: $504.7 billion (3.5 percent)
State and local governments: $506.1 billion (3.5 percent)
Japan: $912.4 billion (6.4 percent)
U.S. households: $959.4 billion (6.6 percent)
China: $1.16 trillion (8 percent)
The U.S. Treasury: $1.63 trillion (11.3 percent)
Social Security trust fund: $2.67 trillion (19 percent)

Chart Source: Who Owns Treasury Debt?

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Do you know a threshold earner?

Here’s just a small excerpt from a thought-provoking Economist article:

In an American Interest essay on income inequality, Tyler Cowen broached the subject of the “threshold earner”:

A threshold earner is someone who seeks to earn a certain amount of money and no more. If wages go up, that person will respond by seeking less work or by working less hard or less often. That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure—whether spending time with friends and family, walking in the woods and so on. Luck aside, that person’s income will never rise much above the threshold.

Source: Work for post-materialists (The Economist)

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Library of Economics and Liberty: EconTalk Podcast

I consume most of my information online through RSS feeders and podcast applications.

I try to allocate roughly 15% of my subscription lists for new content. I’ll often add new podcasts and RSS subscriptions in hopes of discovering a permanent staple.

During this discovery process I stumbled upon a wonderful economics resource called the Library of Economics and Liberty, or EconLib for short. The EconLib website is a treasure trove of economic material presented in a didactic format.

I discovered EconLib by adding their weekly podcast EconTalk to my podcast queue. EconTalk is a mix of one-on-one discussions using today’s news, books and topics to illustrate economic principles in practice.

It’s a real delight to hear important economic issues discussed by economists in the context of our current economic milieu.

The host Russ Roberts is a professor of economics and poses the perfect combination of challenging, insightful and clarifying questions.

It was their most recent podcast on income inequality that inspired me to write this post. Economics professor Robert Frank and Russ Roberts held an inquisitive discussion with both philosophical ideas and empirical evidence presented.

It’s these types of essential conversations that you’re hard pressed to find in today’s fast paced financial news echo chamber.

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