28 Oct 08 
New Home Sales Q4 Economic Outlook
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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.
Tags: 2009 economic outlook, consumer confidence, home builder news, Home Builders, housing meltdown, housing sector, housing sector news, new home incentives, new home sales, real disposable personal income
