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The great deleveraging – US households see access to debt diminish. Housing affordability and reversion to the home price to family income ratio. -
"Households in the US continue to face a painfully slow process of austerity via debt deleveraging. In a debt based system like the one we live in access to debt is viewed by many as access to money. That is, your ability to finance a car, home, vacation, or even a college education is largely contingent on your ability to access debt. With the markets reaching a peak debt situation households have been in a major process of deleveraging since 2007. In fact, household debt obligations are now back to levels last seen in the early 1990s and similar to levels of the mid-1980s. Most of this debt removal has occurred via the painful process of millions of mortgage foreclosures. Say someone bought a home and took on a $400,000 mortgage. The home is now worth $200,000 and unable to pay the bills, the home is taken back by the bank. The bank instead of having a $400,000 “asset” now only has a $200,000 line item but more importantly, the home buyer is freed from the massive debt albatross. Multiply this millions of times over and you get a clear sense of the deleveraging many Americans are undergoing." -
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