American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
June 2007

The College Market Bubble

1. Hot Trends: THE COLLEGE MARKET BUBBLE
2. Q & A: HOW MANY OWN A VACATION HOME?
3. Cool Research Links: LOCAL AREA SALARIES, CELL PHONES ONLY
4. New Books from New Strategist: AMERICAN TIME USE, AMERICAN HEALTH, AMERICAN INCOMES, AND AMERICAN MARKETPLACE

 

BET YOU DIDN’T KNOW

Thirteen percent of children take prescription medication regularly.

 

1. HOT TRENDS

The College Market Bubble

Prices are high and rapidly rising. Millions are clamoring to buy. Many are taking on debt to cover the cost. A stock market bubble? A housing market bubble? No, the college market bubble.

A speculative bubble occurs when the price of a product or service exceeds its fundamentals, yet excessive numbers of buyers keep driving up the price. This is happening in the college market today. The fundamentals of a bachelor’s degree–greater lifetime earnings, ticket to the middle class–have long been worth the price. But that era may be ending. Is a college education still worth the cost? Yes, but the returns are diminishing, and they are no longer guaranteed.

Over the past five years, college graduates have not fared well. Between 2000 and 2005, the median earnings of men with a bachelor’s degree who work full-time increased by a miniscule 0.9 percent, after adjusting for inflation. Among their female counterparts, median earnings fell 3.3 percent. Everyone from the former chairman of the Federal Reserve Board to the local high school guidance counselor is exhorting children to go to college. Children–and their parents–are listening. More than 80 percent of parents expect their children to get a college degree, according to the Census Bureau’s Survey of Income and Program Participation. Two out of three high school graduates enroll in college within a few months of getting their high school diploma.

The buyers are in a frenzy, and prices are going through the roof. The average charge for tuition at the nation’s colleges is growing by an unsustainable 6 percent a year, much faster than family incomes. Here is the consequence: In 1976-77, one year of college tuition at a four-year public university cost the equivalent of $2,192 (in today’s dollars), according to the College Board. That was just 4 percent of median family income at the time. In 2005-06, one year of tuition at a public university cost $5,492–a much larger 10 percent of median family income. For private schools the numbers are worse. Average tuition at private four-year colleges amounted to 17 percent of median family income in 1976-77, a figure that climbed to 37 percent by 2005-06.

As further proof of a speculative market, these bloated prices have not reduced demand. Instead, they are fueling an aggressive and increasingly questionable student loan business. With parents unable to pay the bill but still urging their children to get a college degree, and children afraid they will be left behind in an increasingly competitive economy, college appears to be a seller’s market no matter the cost. Sixty-five percent of college students today are in debt, according to the National Center for Education Statistics, owing a median of $19,000 when they graduate.

We should know better by now. We have survived two economic bubbles in the past few years, and we should be able to finesse this one. The key, as always, is to buy low and sell high. To buy low, students must find a school they can afford without taking on debt, either by attending a public rather than a private school or by applying to a school of lower quality (thus getting a merit scholarship). To sell high, students must focus on preparing themselves for a financially promising career. It is not enough to get a gentleman’s diploma. A college degree alone no longer guarantees a middle-class lifestyle. But a carefully chosen career path, free of debt, should allow a college graduate to be a bystander, rather than a victim, when the bubble bursts.

By Cheryl Russell, editorial director, New Strategist Publications

To learn more about our the socioeconomic characteristics of Americans, see New Strategist’s newly updated American Marketplace: Demographics and Spending Patterns, 8th edition, available now in hardcopy or as a download from New Strategist.

If you have any questions or comments about the above editorial, e-mail New Strategist at mailto:demographics@newstrategist.com.

 

BET YOU DIDN’T KNOW

Homework ranks seventh and going to class ranks tenth among the most time consuming daily activities of young adults aged 20 to 24.

 

2. Q & A

How Many Own a Vacation Home?

You are not the only one without a vacation home to retreat to after a hard week of work. The percentage of Americans owning a vacation home is tiny, and contrary to expectations, the vacation home market has not swelled with customers as boomers have entered the peak- owning age groups. For the past fifty years, vacation homes have accounted for the same small share of the nation’s housing stock–just 3 percent.

On any given day, 16 million housing units sit vacant across the country–enough empty space to house the populations of the nation’s three largest metropolitan areas (New York, Los Angeles, and Chicago) with room to spare. Most of the vacant units are for sale or rent, or they are being held off the market–perhaps because the owner is waiting for a better price. Only 4 million vacant housing units are seasonal–occupied a few weeks or months of the year. According to the Census Bureau, these are the nation’s vacation homes.

To the disappointment of the real estate industry, the vacation home market has not expanded as was expected with the aging of the population. The demographics promised much but, so far, delivered little. The percentage of households that own a vacation home rises with age of householder to a peak of 6 percent in the 55-to-64 age group–the age group now filling with the large baby-boom generation. But no crush of buyers has appeared so far, forcing real estate pundits to massage the numbers by adding investment properties and timeshares to the mix when reporting on the trends.

Why such a lackluster showing? The baby-boom generation may be too squeezed by college costs and retirement savings to even think about taking on a second mortgage payment. But if they did, where would they be most likely to find such a retreat? Not at the Hamptons or South Beach. The three states in which vacation homes account for the largest percentage of housing units are Maine (16 percent), Vermont (15 percent), and New Hampshire (10 percent).

To learn more about the socioeconomic characteristics of Americans, see New Strategist’s newly updated American Marketplace: Demographics and Spending Patterns, 8th edition, available now in hardcopy or as a download from New Strategist.

If you have any questions or comments about the above Q & A, e-mail New Strategist at mailto:demographics@newstrategist.com.

 

BET YOU DIDN’T KNOW

Between 2000 and 2005, median household income in the Midwest fell 8 percent, after adjusting for inflation.

 

3. COOL RESEARCH LINKS

To keep up-to-date on ever-changing demographics and lifestyles, check out these useful web sites.

How Does Your Salary Compare?
http://www.bls.gov/bls/blswage.htm
Let’s say you are a librarian in Chicago, and you are wondering how your pay stacks up against the wages of your colleagues in the metropolitan area. You can find out at this astonishingly detailed web site. Click on “Metropolitan Area Wage Data for 375 Metropolitan Statistical Areas,” scroll down to Illinois, then click on “Chicago-Naperville-Joliet IL-IN-WI.” Once there, scroll down to “Librarians” in the occupation list (under Education, Training, and Library Occupations), and you will discover that you are one of 5,460 librarians in the Chicago metro area. Librarians in Chicago earned an annual average of $57,560 as of May 2006. If you want to know where you might get paid more, click on the “Librarians” link, which will take you to a page revealing that, among metro areas, librarians get paid the most in San Jose, California–an annual average of $69,360. (Of course, housing prices are higher there too.) Get fun facts like these for any occupation from this enormously entertaining Bureau of Labor Statistics web site.

The Cell-Phone-Only Population
http:// www.cdc.gov/nchs/data/nhis/earlyrelease/wireless200705.pdf
Sometimes the most interesting bits of information come from the most unlikely places. The latest update on cell phone use is contained in recently released estimates from the federal government’s National Health Interview Survey. The stunning finding: As of the last six months of 2006, fully 29 percent of adults aged 25 to 29 are cell-phone-only users and have no landline phone. Among 18-to-24-year-olds, the proportion is 25 percent. The abandonment of landline phones by young adults has occurred with alarming speed. The percentage of 25-to-29-year-olds with only cell phones more than tripled in the past three years, rising from just 8 percent in 2003. Survey researchers are worried. The rise of cell-phone-only households will skew results of random-digit-dial telephone surveys, they fear. “Coverage bias may exist if there are differences between persons with and without landline telephones,” the report concludes.

 

BET YOU DIDN’T KNOW

The percentage of Americans identifying themselves as Protestants has fallen from 64 to 53 percent over the past three decades.

 

4. NEW BOOKS FROM NEW STRATEGIST

Five reasons why New Strategist’s four new titles should be on your bookshelf:

  1. Fast access to the numbers you need
  2. East to understand and use
  3. Every number fact checked
  4. Charts and tables well constructed for data clarity
  5. Indexed for easy and quick use

NEW TITLE: American Time Use: Who Spends How Long at What
American Time Use: Who Spends How Long at What presents the details about how people spend their time by the single most important factor determining time use–their age. A person’s age determines his or her lifecycle stage, and lifecycle stage determines whether he or she is in school, in the workforce, married, or a parent. Lifecycle stage sets our priorities, determining how we spend each day. Not available on any government web site, the detailed time use data presented in American Time Use were obtained from the Bureau of Labor Statistics upon special request. The extensive comparisons of time use by lifecycle stage included in the book are also not available from the federal government. New Strategists statisticians analyzed the raw time use data to produce the percentages of people participating in activities, the indexes, and the rankings–each of which reveals significant differences in time use by lifecycle stage. $89.95 (ISBN 978-1-933588-27-8; 480 pgs.; hardcover; June 2007). Need it now? Download it today from New Strategist’s web site, http://www.newstrategist.com.

NEW EDITION: The American Marketplace: Demographics and Spending Patterns, 8th ed.
Quick and easy access is the goal of the new eighth edition of The American Marketplace: Demographics and Spending Patterns. Designed for convenience, The American Marketplace draws on scores of government and proprietary sources to give you a population profile of the United States in one handy volume. Its hundreds of tables are organized into nine chapters on education, health, housing, income, labor force, living arrangements, population, spending, and wealth. $89.95 (ISBN 978-1-933588-23-0; 532 pgs.; hardcover; June 2007). Need it now? Download it today from New Strategist’s web site, http://www.newstrategist.com.

NEW EDITION: American Health: Demographics and Spending of Health Care Consumers, 2nd ed.
American Health: Demographics and Spending of Health Care Consumers focuses on health care consumers rather than industry statistics and reveals future market and policy needs. Drawing on government publications and web sites and giving you more than twice as many tables as contained in the popular Health, United States, American Healths fourteen chapters examine the whole gamut of our physical and mental wellbeing–addictions, aging, alternative medicine, births, deaths, disability, diseases, health care coverage, health care visits, hospital care, mental health, sexual attitudes and behavior, weight and exercise, and attitudes toward health care. $89.95 (ISBN 978-1-933588-26-1; 448 pgs.; hardcover; June 2007). Need it now? Download it today from New Strategist’s web site, http://www.newstrategist.com.

NEW EDITION: American Incomes: Demographics of Who Has Money, 6th ed.
(The first edition of American Incomes was selected as a Best Reference Source by Library Journal.) The new sixth edition of American Incomes: Demographics of Who Has Money explores and explains the economic status of Americans. It looks at household income trends by age, household type, race and ethnicity, education, region of residence, and work status. It examines trends in the incomes of men and women by a variety of demographic characteristics. It includes an analysis of hard-to-get discretionary income figures, produced by New Strategists statisticians specifically for this book. It provides the latest data on the wealth of American households. The poverty population is also a focus of American Incomes. $89.95 (ISBN 978-1-933588-26-1; 448 pgs.; hardcover; June 2007). Need it now? Download it today from New Strategist’s web site, http://www.newstrategist.com.

To see detailed lists of all the data tables in every New Strategist book, plus the books’ introductions, indexes, bibliographies, and sample pages, go to http://www.newstrategist.com.

 

BET YOU DIDN’T KNOW

The United States was home to 10.5 million undocumented immigrants in 2005, up from 8.5 million in 2000.