As I work on some interesting upcoming posts, I want to share a few items I found interesting during the day. I started with yesterday’s post illustrating a changing sentiment in international trade. However, with such an unprecedented economic upheaval, there was bound to be significant changes in attitudes. Let’s examine…
More Borrowers Pay Credit Cards Before Mortgages
It’s exactly the opposite of the norm. Usually cash-strapped Americans during tough economic times will miss credit card payments before they’ll miss mortgage payments. Welcome to the new world order.
The percentage of borrowers who are delinquent on their mortgages but paying their credit card bills on time is growing, to 6.6 percent in the third quarter of 2009 from 4.9 percent in the same quarter of 2008, according to a new study by Chicago-based TransUnion. In an interview with Reuters, the author of the study, Sean Reardon, confirmed, “This goes against conventional wisdom and that has always been that, when faced with a financial crisis, consumers will pay their secured obligations first, specifically their mortgages.”
For years, government and banks have promoted the idea of housing being an investment as opposed to a stable home. While this idea blew up in their face and caused a major crisis, it also began a new trend. In a more mobile society, many consumers don’t consider their house as sacred as once before. Financial considerations are far more important. As I’ve repeatedly said on this website, it makes no financial sense to pay a mortgage significantly under water when renting can often be half the price. Evidence is clearly indicating people losing consideration for the moral appeal of continuing to pay a mortgage. When financial incentives are so strong, there is really nothing changing this trend. Considering the sheer volume of under water homes, this has become a trend rather than simply an example.
On to the next…
Landing a new job in this withering economy may require a stop in school first.As work in many industries dries up, a growing number of Americans are retraining for new fields in hopes of securing employment. This is certainly true for the jobless in Rhode Island, where unemployment is at 10%, the highest rate in more than 30 years and the second highest in the nation…
Some people, however, worry that they’ll wind up in the same place even after retraining – without a good job.
And even if they find work, starting over in a new career can often mean entry-level positions with lower salaries and less-desirable shifts. This is especially true for those in manufacturing, many of whom pulled in more than $25 an hour with just a high-school diploma.
This may seem like an obvious trend. If there are no jobs available to graduates or recently laid off workers, they should logically do what it takes to get something new. Retraining is the most obvious choice. While I am encouraged to see the economy naturally adjusting to changes and certainly welcome an educated society, I am concerned there are false hopes in continuing education. I will address my thoughts on education this weekend but am leery of people expecting new training or higher degrees to automatically lead to better employment prospects. Qualified individuals have been laid off in every industry. Trying to make the switch and competing with experienced workers is a risky proposition and should only be done with extreme care and plenty of backup options. Paying large sums of money and exerting significant time and effort are risky for an uncertain outcome.
Finally…
Health-Care Burden Shifts to U.S. Government as Spending Soars
Health-care spending in the U.S. will almost double in 2019 to $4.5 trillion, or more than 19 percent of the economy, as unemployment and aging baby boomers drive up government costs, economists forecast.
Spending already jumped to $2.5 trillion, or 17.3 percent of the economy, in 2009, the economists from the U.S. Centers for Medicare and Medicaid Services said in their yearly estimate, published today in the journal Health Affairs. The increase in share of gross domestic product, from 16.2 percent in 2008, was the biggest since record keeping began in 1960.
The analysts, whose agency manages the government’s largest health-insurance programs, said their 11-year projections reflect “the influence of the recession” that began in December 2007 and the aging of the generation born from 1946 to 1964, the post-World War II population surge known as the baby boom. The projections don’t include the impact of a proposed health-care overhaul, which is stalled in Congress.
We all know this trend is nothing new. While I’m pleased to see the atrocious Congressional health care bill fail, this should not be confused for a desire to see health care drop to the back of the agenda. Health care remains a very serious issue both financially and as a domestic issue, which the United States has no excuse for failing to address. No developed country should have such a substantial uninsured population and such a high cost of service. This is unacceptable and needs to be addressed immediately. This trend will not reverse and needs to be considered during the voting season.
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Evidence of Changing Trends6.0101
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Is it so surprising that people choose paying credit cards over mortgages when there are intelligent people like Muwabi advocating walking away? Why wouldn’t you walk away, or threaten to walk away for that matter, when you have the government forcing lenders to give defaulter’s every break they can…..it is to your advantage to be a defaulter. Wouldn’t want to default on that credit card though because that they will take away from you and then you can’t buy that 42 inch flat screen with a blu-ray DVD player………and might as well throw in an XBox while you are at the Best Buy getting the new TV. Here is something I am thinking about adding to the “JAE American Survival Act of 2010″…….you default on your mortgage……..you surrender all credit cards.