It was a disaster waiting to happen, considering companies were slashing wages and salaries, outsourcing jobs whenever possible, and insourcing illegal labor to further depress the wage base:
Median home prices in the US have nearly doubled over the past ten years, from $109,000 in 1995 to $206,000 in 2005, outpacing the growth of the consumer price index by over 33 percent during this period. As median-priced homes have moved out of reach of median-income earners, homebuyers have sought to use riskier mortgage instruments to bridge the gap.
Despite the increase in prices, however, the past 15 years have seen a five percent increase in the home ownership rate. Considering that the median wage has been stagnant since 1999 and incomes of low-paid workers have been declining for decades, it would follow that this change has come about through increasing indebtedness.
Indeed, overall household indebtedness climbed drastically during the housing bubble, just as mortgage debt constituted a greater section of overall household debt. According to figures from the Federal Reserve, outstanding household debt as a percentage of disposable personal income grew from 88 percent in 1994 to 117 percent in 2004. The Washington Post reported that this statistic reached 126 percent in 2005—a 45 percent increase in the course of 11 years. According to a 2006 report in Harper’s Magazine, almost half of first-time home-buyers paid no money down on their mortgages in 2005.
"Homeowners," a misnomer if there ever was one, were and are cash poor.
