America’s Middle Class Is No Longer the Majority
Source: Wall St. Journal
America’s middle class, long a pillar of the U.S. economy and foundation of the American dream, has
shrunk to the point where it no longer constitutes the majority of the adult population, according to the
findings of a report from the Pew Research Center. After more than four decades of serving as the
nation’s economic majority, the American middle class is now matched in number by those in the
economic tiers above and below it.
Making sense of the story

There were 120.8 million adults in middle-income households in early 2015, compared with
121.3 million in lower- and upper-income households combined. It’s the first year that the latter
total dwarfed the middle-income figure.

While the share of U.S. adults living in both upper- and lower-income households rose alongside
the declining share in the middle from 1971 to 2015, the share in the upper-income tier grew
more.

The nation’s aggregate household income has substantially shifted from middle-income to upperincome households, driven by the growing size of the upper-income tier and more rapid gains in
income at the top.

Fully 49 percent of U.S. aggregate income went to upper-income households in 2014, up from 29
percent in 1970. The share accruing to middle-income households was 43 percent in 2014, down
substantially from 62 percent in 1970.

Moreover, because of the housing market crisis and the Great Recession of 2007-09, middleincome Americans saw their median wealth (assets minus debts) fall by 28 percent from 2001 to
2013.

In 2015, 20 percent of American adults were in the lowest-income tier, up from 16 percent in
1971. On the opposite side, 9 percent are in the highest-income tier, more than double the 4
percent share in 1971.

At the same time, the shares of adults in the lower-middle or upper-middle income tiers were
nearly unchanged.
Read the full story
http://blogs.wsj.com/economics/2015/12/09/americas-middle-class-is-no-longer-the-majority/
In other news …
Will El Niño hammer the housing market?
Source: OC Register
With the strongest El Niño on record predicted by the National Oceanic and Atmospheric Administration,
all types of property owners hope to get ahead of the storms. It’s possible the storms could create
construction delays, and flooding or mudslides could create some issues for local housing markets.
Madeline Schnapp, director of economic research for Property Radar, commented, “If the El Niño turns
out to be as bad as predicted then the potential impact of real estate sales would depend on two factors.
One, location and whether or not that area is at risk for mudslides and/or flooding, and two, the month
with the highest rainfall.” REALTORS® have been reminding clients that it’s always best to be prepared.
Read the full story
http://www.ocregister.com/articles/homes-695072-market-going.html
Look Who’s Spending Less: Higher-Earning, Older Americans
Source: Wall St. Journal
The pace of consumer spending, outside of big-ticket items such as cars and homes, has eased, which has
puzzled economists who expected improved spending in light of solid hiring, improving wage gains, and
cheap gasoline. But a report from JPMorgan Chase & Co. found mid- and upper-income Americans, and
those older than 65, pulled back on spending sharply from mid-2014 through June, while outlays among
those younger than 35 and those with lower incomes held up fairly well. The report found overall
spending on “everyday” products and services—the type of purchases you would put on your credit or
debit card—rose just 0.5 percent in the second quarter of 2015, from a year earlier.
Read the full story
http://blogs.wsj.com/economics/2015/12/09/look-whos-spending-less-higher-earning-older-americans/
Where millennials go for financial advice
Source: Yahoo! Finance
In the aftermath of the Great Recession and contending with mounds of student debt, few millennials
have sought out a traditional financial adviser. However, new and unconventional approaches are giving
20- and 30-somethings the financial advice they need to start saving and investing. Whether they utilize
podcasts and blog posts hosted and written by financially savvy young people, or social clubs with
classes and programs, millennials are still going somewhere for such information. Technology like a
robo-savings tool and various apps are also popular. Financial decision-making will be important for
this age group as they look to invest in the purchase of a home.
Read the full story
http://finance.yahoo.com/news/where-millennials-financial-advice-030300185.html
Watch Ryan Gosling Break Down the Housing-Market Collapse
Source: Vanity Fair
The complexities of bonds, premiums, default rates, and what happened during the housing crisis of 2008
is tackled in a new movie titled “The Big Short.” Ryan Gosling’s character, Jared Vennett, uses the
building block game Jenga in the movie to convince a room full of investment bankers that the housing
market was guaranteed to collapse. The characters contend with making money off the crisis, and as
Gosling puts it in the film, “I’m standing in front of a burning house and offering you fire insurance on
it.”
Read the full story
http://www.vanityfair.com/hollywood/2015/12/ryan-gosling-jenga-the-big-short
Chinese Cash Floods U.S. Real Estate Market
Source: New York Times
Chinese money has become a major force in real estate around the world. The flood of money is likely to
persist despite the current tumult in China because while a currency devaluation and stock market crash
have crimped the country’s buying power overseas, the resulting uncertainty is making many Chinese
eager to invest anywhere except their home country. Chinese buyers have snapped up luxury condos in
Manhattan and McMansions in Silicon Valley, pushing up home values in big cities. It is now spreading
to the middle of the country, where prices are more modest and have room to run. In fact, Chinese
families represented for the first time the largest group of overseas home buyers in the United States. A
majority of home purchases by Chinese buyers — 69 percent — are entirely cash, which often outcompetes the typical American home buyer who requires a mortgage.
Read the full story
http://www.nytimes.com/2015/11/29/business/international/chinese-cash-floods-us-real-estatemarket.html?_r=2
Talking Points …

Homebuilder confidence slipped in December, but the sector is poised for consistent growth next
year.

The National Association of Home Builders (NAHB) said Tuesday that sentiment in the market
for newly built single-family homes fell 1 point, to 61, on the housing index. Regionally, the
three-month averages showed that confidence rose 3 points in the west.

The index measuring sales expectations in the next six months fell two points to 67, the
component gauging current sales conditions dropped 1 point, to 66, and the index tracking buyer
traffic declined 2 points, to 46.