This Merrill Lynch report titled 1980s Redux? caught my attention this morning, especially the charts with comparisons between the late 1980s economy and the sputtering economy of today.  The charts are identical except that you have to look closely to see that the household debt-to-income ratio of the 2000s begins above 100% and rises from there.  In the late 80s it peaked around 85%.  It’s an interesting short read with lots of pictures, so check it out and then think back to what life was like for you then versus today. 

I was just graduating high school in the late 80s and preparing to vote in my first presidential election. One of my favorite memories from that time is riding in my friend Huck’s VW bus with a group of friends to the polling place and casting my first Bush vote. The van was full of smoke and we were having a great time as always in sunny Southern California.  I obviously didn’t think too much about the economy or politics then and was really only thinking about how to pay the rent and college tuition.  I solved both of those problems by joining the Army for five years and naively insulated myself from reality while I finished my degree.  Fortunately, I left the Army in 1994 after the brief recession of the early 1990s worked itself out. 

Things are different today for me just as they are for millions of other people.  I have the proverbial wife, kids and a real estate business, which causes me to worry more about the economy and trends in the housing market than I care to at the moment.  In regards to real estate, I believe the markets will correct themselves and we’ll experience another positive economic cycle, but right now nobody seems to have any clue what to expect in the next year or two.  Many people in my industry have been predicting some miracle reversal in the short term, 6-12 months, but it feels like this one is going to take some time to stabilize. I get the feeling this fall that we’re just experiencing a pause or quiet before the storm in early 2008 when home inventory levels will reach new highs, possibly 12-months worth of unsold homes on average. That’s just my opinion and millions of homes are going to continue to sell in the next year, but the trends overall are not positive as the Merrill Lynch report indicates.  I’m interested in how real people are perceiving the current market, as compared to the wild extremes that are covered in the media, which don’t correlate with my day-to-day exposure to the market.