Monday, August 17, 2009

Consumers Decide They Don't Need More Stuff

I was listening to Bloomberg on the radio this morning and I heard that there is real fear in the market about consumer spending for back-to-school and even this coming Christmas. The US economy, being so dependent upon consumer spending, is unlikely to recover, say the experts, until the spending increases to 'normal' levels. I get the feeling that American consumer spending may never recover to 'normal'. Finally people have realized that they don't really need to buy endless crap at the Christmas Tree Stores or home repair stuff at Lowes. The reason? The value of their homes is equal to or less than what they paid. Home equity is a thing of the past, and unlikely to rear its ugly head for quite some time. A friend who used to work for Fannie Mae, and now handles getting rid of foreclosures for banks, told me this weekend that the record foreclosures seen in July (360,149 - up 32% year on year)were just the beginning. She says that the real pain is still to come and that there is a veritable tsunami of foreclosures already in the pipeline. The end of the housing bust is not nigh, and prices will fall further still. This is not what the market wants to hear. But it might have to soon.


  1. The price of my house has not fallen. In certain areas prices do not come down. Certain people still have money and location location and location remain relevant to some buyers. House prices in the UK have started to increase now while those in the USofA continue to be blighted. I remember this situation when I was living in the New York area in the early 80s. I took a real bloodbath at that time.

  2. Dear Seriously Deluded,
    Last year we were assured by a real estate agent that the oceanfront property in Maine we were interested in 'never' fell in price. This year she is begging us to make offers 30% below the asking price. Location does help, but it may not be enough in this economic climate (and the UK is getting worse as the rest of the world improves!).