The secret of continued economic growth

Americans are making more big ticket purchases and driving the economy at a time when predictions suggested we should be seeing otherwise.

Earlier this year, we took a real one-two punch between higher payroll taxes and then the sequestration. The assumption was the combo would take the economy down. Instead, the economy continues to grow!

People are doing the opposite of what they’ve normally done based on historical patterns. In the past when we’ve felt pinched in the wallet, we would still do little things like go out to eat. But we’d shy away from larger ticket things like home improvement and car buying.

Yet the funny thing is that people are forgoing simple pleasures right now — restaurants, furniture stores, and electronics purchases — and they’re doing the big ticket items. Car sales are booming. And the housing market continues its recovery.

The number of people who are upside down in homes has been greatly reduced, though not eliminated.
New numbers I saw recently suggested the equity that the average American has is bumping up at 50%. How can that be?

Well, a third of Americans own their homes free and clear. And huge numbers of other homeowners have taken advantage of artificially low interest rates.

So we have three pools of people: The shrinking ranks of those who are upside down. The people with mortgages who are building equity. And those who own their homes free and clear. It all adds up to enhanced mobility meaning that people can again move for job prospects.