Economy Archives » Larry & Kathy Reichle

August 22, 2019

The drop in mortgage rates continues to stimulate the real estate market and the economy. Home purchase demand is up five percent from a year ago and has noticeably strengthened since the early summer months, while refinances surged to their highest share in three and a half years. Households that refinanced in the second quarter of 2019 will save an average of $1,700 a year, which is equivalent to about $140 each month. The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity.

Current Mortgage Rates Data Since 1971 xls

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Inequality in America has become a major talking point in recent years. For many people though, the concept of inequality – the idea that wealth is spread very thinly at the lower end of the socioeconomic ladder – is still an abstract concept.

There are over 125 million households in the United States, each with their own unique structure and financial situation, so understanding such a complex issue requires reducing it to proportions we can understand.

American Households as a Neighborhood

In the visualization above, American households are distilled down into 100 homes, then color-coded into $25,000 income increments.

One house is allocated for those making $300,000 and more per year. On the other end of the scale, we can see that 24 of the households earn $25,000 per year or less, and nearly half of the households have an annual income lower than $50,000.

Here is a more granular breakdown of numbers, this time from a slightly different data source (U.S. Census Bureau’s 2017 Household Income Survey):

Income Bracket	Households (Millions)	Share of Total
Less than $15,000	14.1	11.2%
$15,000 – $24,999	12.1	9.6%
$25,000 – $34,999	11.9	9.4%
$35,000 – $49,999	16.3	12.9%
$50,000 – $74,999	21.5	17.0%
$75,000 – $99,999	15.5	12.3%
$100,000 – $149,999	17.8	14.1%
$150,000 – $199,999	8.3	6.6%
$200,000 and up	8.8	7.0%

Households between $35,000 and $100,000 are generally considered middle class. That said, the geographical location of where a household is located also makes a big difference.

The Power of Place

Not surprisingly, cost of living strongly influences your household’s place on the income spectrum.

In El Paso, Texas, a $50,000 income places a household of four people in the middle class. However, in a more expensive metro area, like San Diego, that same income lands your household in a lower income tier. Here’s a closer look at the cost of typical expenses in the two metros:

Expense	El Paso, TX	San Diego, CA	Cost difference
Home price	$239,285.67	$755,273.67	⬆︎ 216%
Apartment rent	$945.92	$1,961.55	⬆︎ 107%
Energy cost	$133.53	$213.96	⬆︎ 60%
Dentist visit	$89.08	$104.25	⬆︎ 17%
Coffee	$4.47	$5.39	⬆︎ 20%
Hamburger	$3.56	$4.35	⬆︎ 22%
Gasoline	$2.31	$3.31	⬆︎ 44%

Mixed Messages

The median household income in the U.S. continues setting new monthly records, and we’ve just seen this decade’s largest year-over-year increase in individual wages.

One side effect of this economic growth is that households in the top wage bracket – the well-appointed yellow square in our visualization – have a tendency to reap outsized rewards. So, for now, as America’s economy trends upward, so does its Gini Coefficient.

By: Nick Routley