America’s New Financial Reality



Here is the main theme I have endeavored to hammer home in my writing:  we simply do not have enough qualified home buyers (excluding cash buyers) to absorb the true inventory of housing in this country.  Even historically low-interest rates  have not changed this truth.  Mortgage purchase demand remains anemic in spite of record low rates.

      However, a  larger problem looms than the US Housing market.  The US economy from 1996 until 2007 was driven by boom and bust cycles of inflated asset prices in both the stock market and real estate.  Now that the economy does not have a third bubble, we must ask ourselves if the economy can generate enough growth to meet our long-term obligations.  Our current deficit is proof that our economy cannot generate enough growth to meet our year to year budget obligations.   Yet, the mother of all debt bombs awaits in  our future unfunded liabilities well north of 50 Trillion dollars, which will bankrupt our country before 2050.  This disaster can maybe be avoided if both parties work together to create a tax and entitlement reform plan which sets us on a fiscally responsible footing.   If our country cannot grow at 3% now, even with trillions pumped into the economy, low taxes, low-interest over the last three years, when will and what will bring growth needed?
     We are still a consumer economy and no closer yet in becoming an export power house. So we need to consume to get the growth.  Americans’  (excluding the top 1% ) debt to income ratio will prevent enough consumer spending to  generate the needed growth.  Our after tax income can’t support this economy any longer,  not to the point to cover our long-term obligations.  This is a byproduct of not having wage growth in this country.  Like a company with heavy debt and not enough income coming in,  we have managed to move along because debt is cheap and we are great in punting problems down the field. However, we can’t rely on interest rates staying this low for the next 38 years. We need to act like adults and realize that if we want this great country to stay great, we need to make hard choices now before the market forces us to make even more difficult ones down the line.

    Logan Mohtashami is a senior loan officer at his family owned mortgage company AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial columnist for and contributor for