Marketplace - American Public Media

Emotions and money are a complicated pairing in any case. Throw in the parent-child relationship -- also sometimes complicated -- and you've got real problems. Turns out, senior citizens are racking up debt to help pay for stuff their kids want and kids are digging themselves into a hole to give their parents a hand -- and it's a mess. Carmen Wong Ulrich is a personal finance journalist and author of "The Real Cost of Living" who wrote about this issue for the New York Times.

"It's recently historically gotten very bad. There was a survey by Demos and AARP, they found that the average credit card balance for folks over 50 is now bigger than for folks under 50 by about $2,000. This is the first time that that's ever flipped. It really says a lot about what's going on with that generation," says Wong Ulrich.

One of the reasons that seniors are going into debt is because many of them are helping family members. The report found that nearly a quarter of folks over 50 gave money to or paid the debts of relatives by adding to their own credit card balance. But that's both adding debt to the younger generation and making things worse for the older generation, too.

"Every generation is going deeper and deeper into debt and the younger generations are helping the aging parents who are in trouble. But a lot of the thought process behind the how and why this kind of happens -- with this generation in particular -- and I've talked to psychologists about this, there's a lot of loneliness; there's a lot of guilt for making their children, they want their children to have a better life than they had. So their children's expectations are not being managed. The grown children say, 'I need my wedding paid for,' 'I need college paid for.' All of these things at the same time when we have seniors hit at the same time by a bad economy and bad market."

Wong Ulrich says one reason that some seniors wind up with debt problems and other don't has to do with their mindset. Culturally-speaking, Wong Ulrich says that the first generation of seniors to have easy access to credit may end up becoming super consumers who accumulate a lot of stuff over time. Moreover, seniors are guilted into giving a better life to their children without realizing that they may be enabling their kids to not work for themselves or learn the value of money.

The generation of older seniors who are children of people who grew up during the Great Depression....

"You see these kids of Depression-era parents who really went the opposite direction. Part of it is, after the Depression and after -- especially the '60s -- what we saw was this 'You can have the better toaster,' 'You can have a better car.' There was a lot of needing to upgrade. It's the first generation of "Keeping up with the Joneses." But then you add to that, in the '80s and '90s, easy access to credit and also a great housing market for a while there. And you have an ability to basically live well outside of your means," says Wong Ulrich.

Wong Ulrich advises seniors whose kids want them to go into debt to take care of themselves first. "It's up to you to say, 'You know what, if I do that and dip into my retirement, I might have to possibly move in with you.' Something tells me they may back off a little bit if you put it that way," she says.

Wong Ulrich says to end the cycle, seniors need to develop a plan that you can stick to in order to get rid of the debt, to be able to say no, and even get support from your community. If most of the trouble comes from helping family members, she says you need to go outside the family for support -- like meeting with a nonprofit credit counselor or a financial planner.

If you love something, the saying goes, set it free. Let it go. Give it away, even. Americans give away, on average, about 5 percent of our earnings. Some give more. Some less. A few give everything. Paul Sullivan is the Wealth Matters columnist for The New York Times. He writes in the Times' special section this week about young people who've inherited money -- big money -- and who've decided to give all of it away. Sullivan says it may sound crazy, but these so-called "trust fund progressives" have a different mindset.

"This particular group, they're motivated by social justice," says Sullivan. "They have all this privilege, they realize they have all this privelege, yet they feel a little guilty about it."

Sullivan says these types of inheritors are looking for ways to give money away -- and there's an organization called Resource Generation that brings together young people with financial wealth to help them figure out how to give their money way to causes that matter to them.

"They are writing checks to traditional nonprofits, to charities. They are also making low or no interest loans to organizations that they believe in. Lastly, they are helping their friends. They are perhaps buying a new car for somebody who needs to drive to work or helping somebody who needs to pay a big medical bill," says Sullivan.

Exactly how much money are we talking about here? There's a wide range -- everything from inheriting a house worth $500,000 to having access to a foundation worth $100 million. And the young wealthy are not just giving away dividend checks and extra income, they are dipping into principal and giving away vast sums.

If all of this sounds crazy, Sullivan says there is some young idealism involved here. Inheritors who are involved with Resource Generation are between the ages of 18-35. "They kick them out when they are 35 and become cynical," he jokes.

Eurozone finance ministers reached a last minute deal to grant Cyprus a $13 billion bailout early this morning. Those with large deposits in Cypriot banks could be hit will a tax of 30 percent in order to help fund the bailout.

Richard DeKaser, economist with Wells Fargo, discusses the impact of Cyprus' bailout on the U.S. economy.

And a new drug, in the final stages of approval by the FDA, could make it easier to give addicts medication without using pills and risking abuse.

Eurozone finance ministers reached a last minute deal to grant Cyprus a $13 billion bailout early this morning. Those with large deposits in Cypriot banks could be hit will a tax of 30 percent in order to help fund the bailout.

Richard DeKaser, economist with Wells Fargo, joins Marketplace's Mark Garrison to discuss the impact of Cyprus' bailout on the U.S. economy.

A country with lots of debt isn’t going to see much growth, right? That's a widely-held belief among the political class, supported by well-funded bipartisan PR campaigns. But many economists just don't agree.

Bloomberg senior writer David Lynch joins Marketplace's Mark Garrison to explain both sides of the debt debate.

Back in 2009 I was working at a bank in London, and had begun earning enough money to really start investing. I'd studied behavioral economics all through college and grad school, so I knew I'd be better at investing than the average Joe.

This was in the midst of the Great Recession, and the price of oil was incredibly low. I had read a few articles, and thought the price had hit bottom. I was sure it could only go up, so I bought into a fund where every 1 percent increase in the price of oil would net me a 2 percent return. Not too bad. I thought I'd need to hold the position at least three months to see the returns I expected. Now all I had to do was wait.

I checked my investment all the time, sometimes twice a day or more. To my chagrin, it fell the whole first week. The second week started out the same, and I got really stressed. Why wasn't it going up? Had I got something wrong? But then the price of oil began to rebound, and by the end of the second week, the investment had returned to the buying price. I sold immediately with zero return. Well, not exactly zero return -- with the cost of the "buy" and "sell" trades factored in, I made a return of -2 percent. Ouch.

So even with all my training in behavioral economics, I fell for a classic investment mistake we call the disposition effect. It's probably one of the most studied behavioral biases out there. It says investors tend to "sell the winners, and hold onto the losers" for purely emotional reasons. Basically, it feels good to close out a position with a gain (selling the winners). And it feels really bad to sell at a loss. As a result, investors tend to hold onto their losers for longer -- often until they break even.

Now obviously, if you sell your winners and hold onto your losers, you end up with a portfolio of losers -- not a good place to be. While I had studied the disposition effect inside and out, it wasn't enough to prevent me from falling prey to it. In the heat of the moment, watching my investment and pride plummet, I was most concerned with ending my anxiety, and not feeling like an idiot.

This isn't surprising -- we know we shouldn't do a lot of things like smoke, drink, eat junk food, etc. But sometimes the hard part isn't the knowing, it's the doing.

Eurozone finance ministers reached a last minute deal to grant Cyprus a $13 billion bailout early this morning. Those with large deposits in Cypriot banks could be hit will a tax of 30 percent in order to help fund the bailout.

But the news extends beyond Cyprus, which is a popular off-shore location for international bank depositors. Many Russians with money in Cypriot banks will feel the pain of the bailout. And that, according to Russian Prime Minister Dmitry Medvedev, amounts to thievery.

"The stealing of what has already been stolen continues," Medvedev said.

The BBC's Steve Rosenberg in Moscow joins Marketplace's Mark Garrison to explain how Russians are responding to the latest bailout plan in Cyprus.

After more than a week of turmoil, eurozone finance ministers reached a last minute deal to grant Cyprus a $13 billion bailout.

Under the current agreement, bank depositors with less than $130,000 will not lose any money. However, bigger depositors -- most of them foreigners -- may be taxed up to 40 percent. Last week, the Cypriot parliament rejected a bailout plan that would have taxed smaller bank depositors 7 percent.

Cyprus' finance minister Michalis Sarris greeted the deal with relief.

"We have averted the possibility of bankruptcy, we really avoided a disastrous exit from the eurozone," Sarris said.

Though Cyprus achieved a rescue deal, analysts say serious damage to the country's banking sector has been done. As banks reopen, many foreign depositors are likely to move capital out of the country. The rating agency Moody's has said in a report this morning that the bailout dealings in Cyprus "will have profound long-term negative consequences" for the country and the region.

Today President Barack Obama will designate five new national monuments. They’re spread all over the country: There's part of the San Juan Islands in Washington state, the Harriet Tubman Underground Railroad National Monument in Maryland, the Rio Grande del Norte National Monument in New Mexico, the First State National Monument in Delaware and the Charles Young Buffalo Soldiers National Monument in Ohio.

All of that new green space, could bring some serious greenbacks into those local economies says economist Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities.

"Those people are going to spend some money in the parks, maybe they’ll buy some food, some souvenirs. That type of spending helps boost local economies," says Bersnstein.

The Rio Grande Del Norte monument in New Mexico is expected to bring $15 million a year to the area.

That’s partially because Americans are starting to travel again says Douglas Quinby, principal analyst at PhoCusWright, a travel industry research firm.

"The economy is definitely improving, so we are optimistic [we are] going to see some gains in 2013," he says. 

Still, it could be a rough year for parks. Many are expected to take a hit under the sequestration budget cuts and will have to cut staff and reduce hours.

An anonymous -- and controversial -- researcher surreptitiously tested trillions of Internet addresses over the past nine months. The hacker found that all sorts of devices are protected only by the easy-to-guess default passwords that the equipment came with when new, according to the BBC.

Chester Wisniewski, with the computer security firm Sophos, joins Marketplace Tech host David Brancaccio to explain what this means for global Internet security.

Even with a federal license, Cody Wilson, the law school student who wants to use 3D printing to manufacture firearms, remains wary the government will shut him down. Wilson, who goes to the University of Texas, is head of an enterprise called Defense Distributed.

Wilson doesn't say whether he thinks the world is a better place with more guns or fewer guns. He takes a libertarian view that technology makes regulation impossible -- including firearms regulation from Congress.

"These old people on the Hill probably really think that they can pass a law and restrict access to guns," Wilson says. "I'm seeing a technology entering the world now that explodes that idea entirely."

Wilson says he's not interested in making his project into what he termed "some mega corporation."  Toward the end of an extended conversation, when pressed about what he really wants to do here, Wilson told us this:

"I'd like to print a goddamn gun, man -- print it without threat of my body being thrown in a cage or being sued for millions of dollars," Wilson says. "My reading is that without an extreme set of licenses and records, that I would be subject to at least half a million dollars in fines and 10 years of federal prison."

3D printing, or "additive manufacturing" uses melted plastic or other materials instead of ink to squirt out shaped objects, such as jewelry, harmonicas, gun barrels or ammunition magazines. Blueprints for 3D printing can be freely shared online.

Click on the audio player above to hear more about 3D printed firearms and the future of gun regulation.

A new drug to treat people with addictions to heroin or painkillers could be on the market before the end of the year.

If Probuphine gets final approval from the FDA in April, it will be part of a growing and lucrative market for an equally fast growing problem.

What excites Pittsburg-based Dr. April Clark is that this new medication is implanted under the skin and delivers medicine for six months straight.

“I have to say it’s kind of the stuff of science fiction,” says Clark.

Right now, the medication Clark can prescribe today must be taken every day. The dosage effectively blocks someone from getting high off an illegal drug. But Clark says if you can’t skip a day -- because the medicine is course through your system for months -- it’s easier to stay sober. And you can’t sell it on the street.

“People who are not prescribed the medication would not get the medication. It can’t kind of get into the wrong hands,” she says.

Some two million Americans are addicted to heroin or painkillers and annual sales of drugs to treat drug addicts is more than $1 billion a year. With all that money on the table, several more drugs are expected to come to market in short order.

Analyst Jason Napodano at Zacks Investment Research says the name of this game is safety.

“If you are a pharmaceutical company and you want to play in this market, you need to come up with something better and safer to treat opioid addicts,” he says.

As this epidemic only grows, Napodano says the FDA doesn’t have much patience for just another pill.

This final note on the way out, one at which I daresay everyone listening to this radio program will shake their heads.

Yahoo spent $30 million today to buy a news-aggregating app -- Summly, it's called. Pulls the need-to-know stuff from news articles and makes it look nice on your iPhone.

Which is great and all. Here's the kicker: Summly was created by a 15-year-old kid to help him get through his homework.

Nick D'Aloisio's 17 now. Rich. And in case you're wondering? Yeah, he totally gets to work at home.

There's a movie coming out in a couple of weeks that's getting some buzz. Baseball fans will know what it's about as soon as they hear the title: "42."

That's Jackie Robinson's jersey number and the film is in fact about his ground breaking career.

The marketing campaign is already gearing up. And it includes one unexpected promotional tie-in -- with Marriott. The hotel chain's paired up with Warner Brothers to be the film's official hotel partner. And they're giving out free tickets and other enticements to attract minorities to join the Marriott loyalty program.

"There isn't a connection." says Wesley Morris, film critic at Grantland. "I guess Jackie Robinson at some point was on the road a lot when he was playing but I don't think he was staying a Marriott for any number of reasons. That's not a slight against Marriott, it's just the time at the time."

Will it work? Kind of depends on Marriott's end goal. "They have a diversity commitment and they're interested in multiculturalism in the way that all corporations say they are" says Morris. But then again, "I don't know, if you're a black person sitting around if you're like, hey I can go to Marriott now because they like Jackie Robinson." "He's like air, there's nobody that doesn't like Jackie Robinson. I don't know if this is something that would distinguish Marriott from any other corporation."

Warner Brothers has stayed mum on the partnership. And maybe that's part of the problem. "Without anybody saying anything, you're just left to speculate" and "that leads you down these cynical roads."

The financial crisis and its fallout cast Wall Street banks in a very poor light, and sent many people looking for alternative places to stash their cash. Some turned to credit unions, but at least initially, many found them lacking. Over the last few years, however, credit unions have stepped up their game. This week the consumer website Bankrate released its 2013 survey of credit unions. Greg McBride is Bankrate's senior financial analyst and joins us to talk about its latest findings. He says at the very least people should consider credit unions.

"[Credit unions are] not a one-size-fits-all solution by any means. But I think when you look at how compelling the offers can be from credit unions, we found that more than 70 percent of the nation's largest credit unions offer a free checking account. That's about twice the pace that we see among banks. I think that warrants them being in the conversation," says McBride.

How can credit unions offer free checking? McBride says credit unions are by nature not-for-profit cooperatives. And free checking at many credit unions has been a staple long before it became fashionable among banks. He says even with higher regulatory and compliance costs, credit unions have other levers they can pull before they start instituting fees on checking accounts.

Findings from the survey

• Half of the credit union checking accounts that Bankrate surveyed have no minimum opening deposit requirement and none of the 50 accounts require more than $100 to open.
• 74% have no minimum balance requirement, 18% have a monthly fee regardless of balance and the remaining 8% have a fee that can be waived by maintaining a balance of no more than $750.
• The range of monthly service fees on the accounts is $1 to $10, with $2 and $5 the most common.
• The range of non-sufficient funds (NSF) fees at credit unions is $12 to $37. This compares to $18 to $38.50 at banks.
• The most common NSF fee at credit unions is $30, compared with $35 at banks.
• Credit union fees for debit cards and debit card transactions are rare (present on less than 5% of accounts in each case).
• 30% of credit unions either do not charge a fee to use another bank's ATM or provide at least one free withdrawal per week.

Average Credit Union Fees
NSF: $26.74 ($26.65 last year)
ATM Surcharge: $2.29 ($2.08 last year)
Fee to Use Other ATM: $1.01 ($0.97 last year)

Average Fees (Credit Unions vs. Banks)
NSF: $26.74 at credit unions, $31.26 at banks
ATM Surcharge: $2.29 at credit unions, $2.50 at banks
Fee to Use Other ATM: $1.01 at credit unions, $1.57 at banks

What advantages can a bank offer?

"The desire to be able to bank, for example, from mobile capabilities is best among the larger banks. That's something that particularly those under age 30 really strive for. I think that's a real competitive advantage. Credit unions tend to be later adopters of that type of technology, but it's still coming," says McBride. "The ability to bank at any time, anywhere and on your own terms -- to the extent that consumers desire that -- are finding that first and most easily at banks. But the tradeoff is that you're often seeing less availability of things like free checking."

As for the availability of ATMs, credit unions have made big strides to level the playing field. McBride says many small credit unions belong to much larger ATM networks and lot of credit unions have become bigger over the years.

Breeann Mack looks skeptically at the kitchen ceiling of a foreclosed townhouse outside Saint Louis. Or perhaps more accurately, she looks at exposed plumbing and electrical wires where the ceiling is supposed to be. Without even checking the upstairs, Mac decides she’s seen enough. Even though the home is priced at only $45,000, she’s not interested in fixing up someone else’s mistake – not if it means overextending herself financially and potentially making a mistake of her own.

“I want to try to make sure that I’m OK-OK and that, financially, I can pay for the house, the down payment, furniture if I need it,” she says. “I have to be realistic in it.”

Mack, 32, lives with her mother. She spent four years paying off all her debt. Now, she’s thinking very carefully about what she can afford on her $33,000 dollar salary. She’s been pre-approved for a $90,000 dollar mortgage. If she goes with a loan backed by the Federal Housing Administration, her down-payment could be just over 3 percent of that. She wants to keep her payments around $500 a month.

People like Mack are the upside of the housing crisis, says Chris Krehmeyer, the president Beyond Housing, a local nonprofit where Mac’s received financial counseling.

People are much cautious now, he says; some are even scared of homeownership – and that’s a good thing, if it prevents people from taking on more home than they can afford.

But Krehmeyer still believes that most people – even the lowest income families – should be able to buy a home.

"Is there some number where you can't? Sure," he says. "What is that number, it depends upon the marketplace. But just to say arbitrarily if you make less than $26,000 that you can’t become a homeowner, that may not be true."

Krehmeyer says homes are still the best way to help build wealth and pass that wealth on to future generations. It’s just that getting lower income homebuyers through the purchasing process is more complicated.

Beyond Housing runs classes to get people ready to purchase a home and their manage expectations.

Standing in front of roughly two dozen potential home-buyers on a Saturday morning, instructor Chris Gilliam explains that lending standards have tightened.

"Underwriters, that’s the gatekeeper, they’re looking at more things, more factors than they used to," he says.

Attendee Coretta Johnson already knew she had to pay down her credit card debt. But she’s just learned that routinely overdrawing her bank account, which she does once or twice a month, could look bad on her loan application.

"That’s hurting me right now," she says. "Because I know I’m a responsible individual and I just want to leave my kids something. I want to have something in my life that I can say I accomplished and I did."

Homeownership has many benefits, says Ray BO-shara, senior advisor with the Federal Reserve Bank of Saint Louis. "Typically homeowners have about 35 times the wealth of renters."

Many homeowners get tax subsidies; they tend to save more; Kids of homeowners are even more likely to go to college.

"The problem isn’t homeownership," he says. "The problem is if you only pursue homeownership."

In 2007, the bottom 30 percent of homeowners had over half of their total assets in their homes, according to Boshara, who says a more appropriate number would be something around 20 percent.

So while he's still pro-homeownership for low income households, Boshara also thinks people need to build more pain-old vanilla savings and look at other kinds of investments.

"Historically the stock market has outperformed the housing market in terms of an investment," he says. "Many people even think it’s wrong to think of home-ownership as an investment given the risk."

But stocks can be a tough sell.

"It’s kind of scary," says Coretta Johnson, who has invested in a Roth IRA. "I mean I’d rather lock my money up in something that’s benefiting me."

A house is an investment Johnson can live in. She wants a one-story home where she can grow old.

You know the old saying -- if it's too good to be true, it probably is? We all know it. But that hasn't stopped people from falling for a new so-called foreign lottery scam. It goes like this -- you get an email or letter or a phone call from someone who informs you you've won a foreign lottery, now all you need to do to claim your prize is send money to cover the taxes and fees. This scam is so pervasive that the U.S. Postal Service and the AARP have teamed up to warn people about it. The two organizations have been sending out mailers --  mostly to homes with older Americans -- warning people of the con. Doug Shadel, a former fraud investigator who now serves as director of AARP's Washington State office, joins us to discuss the scam.

"What [scammers] basically do is they call up people who are over the age of 70. They tend to be women who are lower-income folks. They tell them the good news that they have just won the Jamaican lottery, or some kind of a lottery, worth $8 million and all you have to do to get that money is to pay the taxes or the legal fees of $500 or $800 and you're on your way. Well, of course, there is no lottery and you're just sending your money to thieves basically," says Shadel.

Why aging boomers are more prone to scams It seems like con artists are dreaming up new scams every week -- and often seniors fall prey to the trickery. But why?

Shudell says the scam has been around for years, but the difference now with these folks is how relentless and aggressive they are.

"In the beginning, [the scammers] are always nice. They're always saying, 'I'm going to pray for you.' I'm asking a lot of personal questions and really being caring. But the minute you stop sending money, that's when it gets really nasty," says Shadel. "Actual direct threats of coming over there and doing bodily harm to people. This really has the effect of frightening folks. It would frighten younger folks, but people who are in their 70s or 80s are really frightened by those kind of things," says Shadel.

Shadel says victims of these types of scams get involved in what's known as the rationalization trap. When victims do something like this, they think on the one hand they are smart, but on the other hand, they did something stupid. How do you resolve that conflict? Shadel says people can either recognize that they were stupid (a difficult thing to do) or say they are smart -- what they did was not stupid -- and continue to do it to prove to the world that it wasn't stupid. The latter is what happens to victims in these scams; they throw good money after bad.

Shadel says he hopes the mailers that the Postal Service and AARP have been sending out help people from falling prey to foreign lottery con artists.

There is a soon-to-be antique sitting in the refrigerated section of your local convenience store. The Pepsi bottle. The number two soda maker has been losing market share to Coke in the last couple of years.

So as part of its we-gotta-turn-things-around plan, it’ll be rolling out a new shape for its single serving bottles next month, the first redesign in about 17 years.

So what difference does the shape of a bottle make anyway?

For one, it affects how many you can ship at once. Square shaped bottles (yes, weird, but there are some) are the most space efficient.

You also want to think about whether the bottle will fit in a cup holder.

In the case of pepsi’s new bottle, the biggest change is to the bottom half of the bottle. It’s becoming more sculpted, with grooves to make the bottle more grippable.

"If you can grip it, that means you can open it easier, releasing that lid and have the carbonation 'Tssssss,'" says John Whaley, the industrial design manager at design firm D2M.

Of course, the average customer is thinking about that "Tssssss," and how the finger grips might enhance it, when they walk in to a store and grab a bottle, Whaley says. "But when they do pick it up, and it is ergonomically contoured, it’s those little subtleties that add to the entire experience."

Though the new Pepsi bottle isn’t all that subtle, says Tom Pirko, a beverage industry consultant at BevMark who has worked with Pepsi in the past.

When Pirko showed pictures of the new bottle, which isn’t out in stores yet, to his staff, one commented that the bottle’s designers seem to have "used the lug nut for their inspiration," he says. "This is a pretty heavy duty masculine approach to bottle design."

That masculine approach might be a good idea, since young men are Pepsi's biggest customers, according to Pirko. Pepsi soda sales declined by 4 percent last year in North America.

But Pirko warns, "changing a bottle shape isn't going to change who Pepsi is. They've got to figure out whether or not they can sell soft drinks to the American public." And as more American's link sugary drinks to obesity, Pepsi sales may have less to do with the bottle, and more to do with what's inside.

There you are, driving home, thinking about what it is you’re going to eat for dinner, when THUMP, you peg a deer.

"It's actually very common," says State Farm’s Angie Rinock,  "we're estimating one and a quarter million drivers every year have some sort of altercation with a deer while in their car." And deer altercations can do some real damage. Rinock estimates the average claim is $3,300.

Learn more about roadkill laws by state and find out your odds of hitting a deer with your vehicle. View the interactive map.

The Montana legislature wants to help take the sting out of that bill, by allowing you to take home your deer, as a bit of a concession prize. "This is a bill that allows a law enforcement officer to issue a permit to take a roadkill animal if it's a deer, an elk, a moose or an antelope if the motorist is the person who smote that particular creature to death," said Montana state Senator Larry Jent during debate.

"I support this bill because I have a couple hunters at home who have poor luck and this would help them," joked state Senator Jonathan Windy Boy.

But there’s a problem with this plan. A deer that’s been slammed by a car might not have all that much edible meat. “Blood will go into that muscle and that meat is no good,” says Nick Bennett, who owns Montana Mobile Meats and processes wild game. Just how much meat you can get out of the roadkill depends on exactly where and how hard you hit it.

The hide isn’t worth that much either -- maybe in the range of five bucks. Hardly solace.

It was a good week for the housing market. We learned nearly two million homeowners moved from being underwater on their mortgages to positive equity. And construction of new homes hit a four-year high.

That's good news for construction workers and providers of building materials.  Today one of those providers, Georgia-Pacific, announced it was spending $400 million to ramp up capacity to meet growing demand for plywood and other lumber products. But in the meantime, prices for those materials are likely to stay high.

"The plywood prices have shot up every day, I mean, they’re rising all the time," says Bob Brown is a manager at Beyers Lumberyard in St. Louis, where forklifts are zipping back and forth, an early sign of what is shaping up to be a busy building season.

You’d think after the cold dark winter of the construction industry’s discontent, the news that housing is back would put a smile on his face. But then he calls his lumber supplier.

“Every time we call prices are higher.”

Costs for raw materials like two-by-fours and plywood are sky high right now. The main reason is that supplies of plywood are unusually low.

"The issue is that inventory are extremely low because everything that is being produced is being consumed right away," says Greg Lewis, who tracks wood panel supplies for Forest Economic Advisors. "People in the market are scrambling to find the panel and lumber that they need."

A year ago, the composite price for wood panels was just over $350 per thousand square feet. Today it’s more than $500. That’s according to Radom Lengths, a trade publication for the wood products industry. Jon Anderson is the publisher.

"The industry reduced its output dramatically when the housing market crashed," Anderson says. "This happened like never before."

Mark Luetters heads the building products division at Georgia-Pacific. He says his company scaled back production by 30 to 40 percent after the housing collapse. And it’s going to take some time to get back up to speed.

"The products we’re talking about right now will probably take 18 months to two years to put into place," says Luetters.

As long as domestic supplies remain tight, retailers and wholesalers have little choice but to import or keep prices high.