With consumer spending steadily decreasing from mid-2007, sparked from the housing meltdown, experts have estimated that consumption will likely fall more than 4 percent annualized this quarter. To add fuel to the fire, the deteriorating credit market has negatively influenced all three major determinants of consumption.
New homes sales will likely remain suppressed well into 2009. Not good news considering the housing sector is already suffering from the rising unemployment, tightened credit conditions, declining household wealth, and in some markets, the affects of recent severe weather.
What does this mean for you?
This will directly affect your access to credit, not to mention your credit rates; and will indirectly affect both real disposable personal income and household wealth. In regards to the economy as a whole, this means that for the remainder of the year, and leading into 2009, we can anticipate diminishing consumer confidence and business confidence, which will cause further payroll cutbacks and additional suppression of real disposable personal income.
So here we are. We’ve witnessed declines in consumer spending, beginning in 2007, employment gains gradually diminish, soaring energy costs, oh… and let’s not forget the significant declines in household wealth and the continued declines in real estate values.
The experts have stated that even with the recent decline in energy prices, it’s not nearly enough to overcome our waning consumption concerns; mainly caused by the large decline in personal wealth.
There is some good news in all of this if you are a homebuyer, or at least a buyer who can meet the criteria to qualify for a loan, and that is new home costs have declined significantly. The fact is that many home builders are reducing pricing, increasing incentives, adding better upgrades, all in an attempt to attract buyers and shrink their inventories. I know what you’re thinking… and yes, there is a good chance that if you buy now your new home may decline in value while the market works its way towards recovery. But if you’re thinking long-term, the declines will be insignificant compared to your gain over the next five to six-plus years.
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Fantastic to point out the silver lining to the housing crunch! Buyers that are qualified can reap amazing benefits and score wonderful houses drastically less than they could have even just last year! And, in turn, as people start to buy the depressed houses, their value will increase…and the housing crunch will start to ease up.
Dave Gouldings last blog post..Preston Home Buyer Featured in SMARTMONEY Magazine
Unfortunately we got a mortgage for our house just before the UK housing market went into freefall. We are now teetering on the edge of negative equity.
Only time will tell unfortunately. You can’t over analyze it to much. I am just hoping that once the elections are over that it will start to pick up. Really doesn’t matter who wins just as long as the uncertainty is over.
Johns last blog post..Silver Spring Real Estate
We have explained to our clients the positive side to the real estate market now is the prices on the current inventory. Although we don’t know when the market will get better there are a number of great opportunities right now.
Davids last blog post..Myrtle Beach Real Estate Showings
All true. For those of us in business this is a memorable experience to go through and something we will be able to tell our kids about. If you can make in business now, you most likely will be in business for a long time.
>>The experts have stated that even with the recent decline in energy prices, it’s not nearly enough to overcome our waning consumption concerns; mainly caused by the large decline in personal wealth.<<
I’d still like to know how gas can jump $1.00 in several months time and then in one our nation’s toughest times in a long time, can go down $1.00 almost over night. To me this still makes no sense.
Jim Adams – CEO
New Homes Directory.com
This will directly affect your access to credit, not to mention your credit rates; and will indirectly affect both real disposable personal income and household wealth. In regards to the economy as a whole, this means that for the remainder of the year, and leading into 2009
John – I think you said it best… “only time will tell…”
Jim – Nothing, economically speaking, makes sense to me right now! If I had to guess, and believe me I’m no expert on the subject, I would assume that with gas consumption drastically decreasing over the past year… the recent price declines is an attempt to battle this.
I haven’t done any research on gas/oil/energy… If anyone can help explain Jim’s question, please do share!
It is a bit curious. Doesn’t seem it could ALL be a result of supply and demand. I have definite mistrust of OPEC and the Oil Companies, so I’m a bit biased.
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Jim – I am unclear of your exact question; but, to address gas prices in general, they are priced based on oil futures. Speculators drove the price of a barrel of oil to $147 in the summer; once economic uncertainty hit in Sept, then they sold or shorted the market — and prices crumbled. Notwithstanding, gas prices are still too high. Perhaps, $1.60 per gallon or less is about right. Let me expound. The stock market is priced at about 1998 levels, and so should gas prices be. Lax lending standards created false growth in the economy. Therefore, a return to normal growth should wipe out the gains in oil prices too. Many emerging markets around the world have receded, and oil speculators were betting on that demand to drive prices higher.
Alpharetta New Homess last blog post..$1995000 MLS® 974 Somerset Dr
People need to quit thinking short term (part of the reason why we are in this mess) and start thinking long term. The deals on new homes are unbelievable and anyone snapping them up looking long term will be happy they did.
Charless last blog post..The Real Haunted Houses of Las Vegas
There is still excess new home inventory, we’ll not see an improvement in the overall market until the inventory levels become more aligned with the number of buyers.
Tinas last blog post..Cobb County Luxury Homes
May be this will lead towards normal and natural prices of properties that it should be. At one side this is awful for those who bought at higer rates and for those who are going to buy for the first time this is a good news.
Economic slash down has effected credit market and housing sector. As said by you Reducing in house prices is advantageous from one side. A buyer can buy houses at low cost and Hope to see this economic situation will improve.
Laura