Real Estate Today

Today, many people are talking about the rebound in the Real Estate marketplace that is emerging. I have thought about this and feel that Americans are still very much overextended. Most people have much more debt in the form of mortgages, credit card and auto loans than they do in assets. In Los Angeles, many people I know earn a modest $250,000 and have a house that exceeds $1MM. Their debt level as a function of income is probably around 400-600%. By comparison, we look at the United States with a GDP of $14 Trillion and debt of $11.2 Trillion. That is only 80% of debt to income! This is a great concern because our savings rate is still very small. As the baby boomers get older and need to sell assets to keep up their lifestyle, they will sell their liquid assets and homes. This will keep a long term damper on the prices of homes in the US. We might very well see a stabilization of Real Estate but don't count on a rebound.