Housing Wealth and Personal Consumption
Consumers react more to changes in their home values than changes in their investment portfolios, according to a recent study.
In fact, real estate economists at UCLA and the University of Southern California found that a 10% decline in housing wealth from the 2005 highs would result in a $105 billion, or 1.2%, drop in personal consumption expenditures. That 10% decline in home values translates to roughly a one percentage-point reduction in real GDP growth, researchers said.
Casaubon’s Book » Blog Archive » What Is Your House Worth? Both … – Both Less and More than You Think Yesterday’s big news included the fact that Americans lost two trillion dollars in housing wealth last year. That’s one heck of a big number – except that like most of the big numbers we actually see in …
Libertarian Democrat Point Of View: “Everyone is facing a … – Households are watching their stock of housing wealth fall when they return home from work, when they turn on the TV, and when they sit down for dinner. Everyone is facing a deterioration in wealth – home and equity owners alike – and …
The Insurance Value of High Home Equity – This ongoing study is monitoring what prompts households’ use of a growing range of flexible mortgages and low cost refinancing opportunities to draw from housing wealth, and release money to spend on other things. …
Housing Wealth and Personal Consumption – Real estate economists at UCLA and the University of Southern California found that a 10% decline in housing wealth would result in a $105 billion, or 1.2% drop in personal expenditures.
“Housing Wealth, Liquidity Constraints, and College Enrollment” – Economics Tuesday, November 4, 2008 3:30 PM to 5:00 PM RM 116 Baker Hall Rice University 6100 Main St Houston,Texas,USA Every Tuesday (unless otherwise indicated) from 3:30 to 5:00 pm at UH (McElhinney Hall Rm 212) or Rice (Baker Hall …
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Given the ratio to income to sales price in California the foreclosure crisis will be a California problem for many years. Until the recent bubble lending 3 times income was a good yardstick but now it ranges from 6 to 10 times income and this has become the norm. A good example would be the city of Santa Rosa BMR problem that has a cap of 50K income for houses costing 304K using the FHA 3% down program. Low income cannot afford a 300K home; only in California is this type of thinking keep alive by local and state government. In fact the State yesterday wants to give low income families 100% financing for foreclosure homes in the most impacted parts of the state. These homes require extensive rehab which low income citizens do not have and will again provide a new wave of foreclosures in the coming years.
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If you are going to buy a home that you are planning on living in, buy one that you can afford, taxes and insurance and maintenance included. The “asking” price does not tell the whole story, nor does the “adjustable” loan. People paid too much thinking they could flip the house, found no buyer and the adjustable loan was “adjusting”, just like they’d been warned. Of course, no one fore saw the gas prices, the electricity prices, the food prices going through the roof, and all the unemployment.
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Not all foreclosures are due to bad mortgages. I would imagine a healthy number are from folks being out of work too. High and prolonged unemployment has gotta spike the foreclosures.
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We’re only seeing the last of the 1 and first of the 3 year ARMs getting their bumps now. Remember that even though housing was slowing refinancing were very strong. Not only that but most people that played that game pulled equity out too which means they essentially lump themselves in with the last of the buyers. Even if you say the top was at the end of ’06, and it wasn’t, we still need to get through all of ’09 just to clear out the last of the 3 year ARMs. And the only way those people don’t get hit hard is if property values not just stabilize but actually rise a bit as lending standards are tighter and they will have to come up with some equity.
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A house is WORTH what you can sell it for. Since it is virtually impossible to sell a house today, it’s WORTH is obviously less that the asking price.
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Why do we think jeopardizing our country’s future for short term gain is a good idea? As a whole, Americans live beyond their means and rely on….credit. You can’t expect Uncle Sam to “fix” all of your personal finance problems. Time to let the chips fall where they may…
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