In recent months, there have been many indications that the economy has recovered from the recent recession, as over 300,000 jobs were added in November and unemployment is at its lowest in nearly a decade. But are these jobs allowing Americans to live well?
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According to PayScale’s Real Wage Index, “wages have risen 7.4 percent overall in the US [since 2006]. But when you factor in inflation, ‘real wages’ have actually fallen 8.7 percent. In other words, the income for a typical worker today buys them less than it did in 2006.” Essentially, wages aren’t keeping up with inflation, so the average American has less discretionary income. While this is troubling news for all aspects of the economy, it is especially harrowing for those who own houses — and those looking to buy.
A peak of 18 million homes underwater, or 35 percent of borrowers, hit in February 2011, according to mortgage performance tracker Black Knight Financial Services. Currently, only 8 percent of borrowers, or about 4 million homes, are in that situation.
“The Great Recession is officially over, but Americans are still 40 percent poorer today than they were in 2007, the year before the global financial crisis,” reports Quentin Fottrell at Market Watch.
The average net worth of white households is down 26 percent since 2007. For hispanic and African-American households, the drop was 42 percent and 43 percent respectively, showing a disproportionate racial wealth gap. Some theorize this is due to white households being more likely to hold stocks and have retirement accounts, says a recent report by the nonprofit Pew Research Center.
This is especially bad news for first-time home buyers without family money. Given that the average down payment required is 20 percent, it could take over 12 years to save enough to buy a home at the current income/inflation rates, which bad news not just for Americans, but the overall economy — even despite claims of economic recovery.
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