Why the Economic Recovery Stinks on Main Street
The results of today's University of Michigan Consumer Sentiment Survey (consumer sentiment fell unexpectedly to 63.2 instead of rising to 69) only reflect what I've been hearing on my radio show and in emails from my readers: Wall Street may be generating huge profits and paying out even bigger bonuses, but life is tough on Main Street:
- Sales and existing homes are up slightly, but down from a year ago - and way down from the peak of the housing boom in 2005. Yes, there are offers, but a lot of the traffic is due to the $8,000 first time home buyer tax credit. We'll see what happens at the end of September, when first time buyers run out of time to use it.
- Home prices are down. It's tough to feel good when you owe so much more than your house is worth.
- More than 27 percent of Americans are underwater with their mortgages. Deutsche Bank says that number is going to 48 percent by 2011, which means housing prices are going to fall further. Bye, bye retirement.
- Credit is being sliced and diced. Even if you have a job, and your home value hasn't fallen THAT much, credit accounts are being clipped, cut off, and closed. If you have a home equity line of credit - watch out. But credit cards are being arbitrarily closed as well, and the credit card company isn't required to let you know your account has been canceled until after it happens.
- True unemployment is very high. By some accounts, the truest measure of unemployment is now approaching 19 percent. In some communities, its as high as 27 percent - above where it was in the Great Depression.
- Unemployment benefits are running out, causing near panic for some families. If you're living on a $300 per week handout from the government, you're barely feeding your family, buying gas for your car and keeping the lights on. Imagine what will happen when the unemployment benefits for 1.5 million unemployed Americans run out, as they're scheduled to do by the end of the year.
- If you have a job, you're happy to have it - although odds are you've taken a pay cut. The average worker now puts in 33 hours a week - and gets paid for 33 hours per week. Across the country, teachers are setting up for school on unpaid, "furloughed" time. Municipal workers are working two or three days less per month in many communities. You try living on 20 to 30 percent less - it's demoralizing and depressing.
- Loan modifications are frustratingly hard to get. Customer service at mortgage service companies large and small is more like no customer service, and the rules keep changing. This is a head-banging experience if there ever was one.
Read more:
Drowning in Debt: 25 Million Will Be Underwater With Their Mortgages By 2011
Filing Bankruptcy to Avoid Foreclosure
