How are home prices doing in America?  After having falled for a couple of years?

Well, better.

Below, I have appended a chartoftheday that shows, rather dramatically, how much the US median price of a single-family home has changed over the past 40 years. Look at the chart for yourself, but make sure you note the rapid price rise that occurred nationwide from 1991 to 2005.

However, since 2005, it’s been a whole different story: the asset that was not supposed to ever fall in value plummeted 35%.

So, if you happened to buy a house in 2005, wowie!, you have been hurt badly; at least, so far. In fact, even the older-homeowner who’s had his or her house since, say, 1979, has actually lost money (about 4.3%).

This reality does not paint a very pretty picture over the past three decades. But maybe it’s worth noting that the median-priced, average home in American home has at least moved back to the top of a trading range that it lived in from the late 1970s into the mid-1990s.

So much for real estate being the greatest investment ever.

As I try to tell my friends and readers:  from decade to decade, no one can tell what asset will do best; hence, hold a diversified portfolio of many different assets.  For sure, owning a house has many benefits, but it’s not likely the greatest of great piggy banks that you’ll crack into at retirement.

With April 15th less than a month away, taxes are on the minds of many. Take a look at the chart below.  It may surprise you.

The chart was created by the Tax Foundation (These are the folks who, annually, tell us when the average American family has finally paid all its taxes - currently, it’s mid April.) with data provided from 2008 IRS tax filings. 

The chart shows a record number of people with no tax obligation. With more people now riding in the wagon, who should be pulling it?  And how much?

It’s a real concern to me - and it should be for all Americans.  To exit the Great Recession we find ourselves in, we need to recreate the conditions for a vibrant, opportunity-filled economy.  Taxes, while necessary, are a drag on that economic environment, as they create disincentives to work hard or to risk capital.  Increasingly, I hear progressive politicans invoke the mantra of only wanting “to get the rich to pay their fair share?”

But what, pray tell, is ”the rich’s fair share”?  Especially if a third of all taxpayers now pay nothing.   The so-called rich, a very small number of taxpayers — the 10% of the country that makes more than $92,400 a year — currently pay 72.4% of the nation’s income taxes (With the top 1% paying about 25% of all taxes). With coming changes in the tax law as a result of the expiration of the so-called Bush tax cuts and punitive tax increases coming to “the rich” from new healthcare legislation, that lucky 10% will pay a still greater percentage of the total taxes paid by all citizens up ahead. Yet these are the very people who create jobs, who endow colleges and universities, who fund improvements to communities, and take risks that help us all.  To burden them - or at times, demonize them - more and more will NOT be helpful to our economy and our country.

Of course, from time to time, there are probably sound reasons why some people will not have a tax liability.  But when 142 million tax returns filed in 2008 resulted in no taxes owed 37% of all filers, we are well on our way to a BIG problem. 

These aren’t people who have overpaid their taxes, mind you, or have had so much withheld from their paychecks that they’ll get refunds. No, those people aren’t counted in the totals I’m referring to.  Those getting refunds paid taxes and have, as well, provided the government with a zero interest loan. No, my comments here are describing a large and growing group of people who pay no taxes at all.

There’s been a 59% increase in the number of nonpayers since 2000, growing from 32.6 million in 2000 to 51.6 million in 2008. Whle, during the same period, the total tax filers grew by only 10%.

According to the Tax Foundation, “The major elements of the Economic Stimulus Act of 2008 boosted the maximum income for nonpayers to more than $56,700″ — the highest ever.

Government keeps expanding the benefits it promises - healthcare now - and thinks there is a limitless claim on “the rich” to pick up the check of these benefits for everyone.  What makes this more laughable is that the administration claims it is cutting taxes for most Americans, when nearly 40% pay no taxes to begin with.

The tax code was originally intended to raise sufficient revenues to pay for the essential services of government. But the tax collection process has morphed into a tool for social engineering that incentivizes or punishes certain behavior to redistribute wealth.  

Having fewer and fewer people pay more and more taxes for more benefits for many who pay nothing is a dangerous trend, all the more so given the passage last night of the largest unfunded entitlement  - healthcare - since Medicare. The increase in the number of people who pay no taxes mirrors the increase in those receiving benefits from the federal government. This creates a powerful bias toward more spending and against keeping tax rates low (to power the economy), since that burden is increasingly being borne by those at the high end of the income scale.

Unfortunately, these are the entrepreneurs, risk takers and small- business people who create most of the jobs.  But be assured, these people will not allow any more of their assets to be taxed away from them than they minimally must allow.  In time, with advisors, they will find ways to shelter themselves from more taxation and in so doing they will reduce their own productive contributions to the economy at large.  In turn, money - taxes - will be raised from more further down the income scale.

But as more and more people get to ride in the wagon, the wagon will tend to break down. No amount of stimulus money extracted from the fewer and fewer who pay taxes will fix the wagon and get it moving again.

Balance needs to be restored. And soon.

When we go to the supermarket and see cereal priced at $10 a box, most of us will buy less cereal. On the other hand, if you’re in the market for a used Honda, and know it’s Blue Book value is $5,000, yet its owner wants only $4,000, and it’s in good shape, you probably snap it up.

Well, the stock market has similar valuation measures, too. One of the most important of them, in fact, is the “price-to-earnings” ratio of a stock or, to measure all stocks, the overall “P/E” ratio of the market. Essentially, a “P/E” measures how many times the current market price of a share of stock exceeds the earnings generated by a single share of stock. The higher the ratio, the more expensive the market – just like the overpriced box of cereal. The lower the ratio, the more the stock, or the market, looks like the underpriced Honda.

Thechartoftheday, below, will help us understand how recent improvements in U.S companies’ earnings have impacted the current P/E ratio of U.S stocks. From the 1930s to the early 1990s, the P/E ratio of the U.S stock market tended, as euphoria took hold, to see P/E’s rise to the low 20s (red line) before correcting for extravagance, while falling to somewhere around seven (green line) before signaling that stocks were again cheap.

In other words, P/E essentially measures the price investors are willing to pay for a dollar of earnings. History shows that P/E’s rose during the dot-com boom (late 1990s); soared even higher during the dot-com bust (of the early 2000s); and then skyrocketed during the financial crisis (of 2007-2009).

Today, with US corporations having just reported their recent earnings, P/E ratios of U.S. stocks stand at about 22 – in other words, at the high-end of the range that has existed from the mid-1930s up until the early 1990s, but much less expensive than we have seen in the recent bust.

This is not all bad.

Last Friday, March 5th, the U.S. Labor Department reported that the unemployment rate held steady at 9.7% during February. For many, this was a surprise and a relief.

The job market is still awful.  As many as 16 million people are now out of work or underemployed in the work they do.  However, depending on one’s level of educational attainment that “awful” job market might be just bad or maybe positively horrific.

As a college professor, I hear a lot these days about a college degree not being what it used to be.  Maybe so.  But from the data below, a college degree sure seems to help its holders all across this land get or keep a job - at least, that is, compared to those without a college degree.  The chartoftheday for this week tells a very compelling story. Check it out below.

As the chart declares, higher educational levels correlate with lower unemployment rates. For example, the unemployment rate for those that have not completed high school (red line below) has increased from 5.8% to 15.6% over the past 40 months — nearly a 10 point increase.

Compare that grimmer reality to the less awful unemployment rate for those that have obtained a bachelor’s degree or more (blue line) — even if unemployment rates for those with a college degree is three percentage points higher than it was 40 months ago.

In any event, the upward trend in the unemployment rate (for all education levels) has slowed in recent months.