Tuesday, September 4, 2007

Affordability ultimately hits the economy

Why California housing matters

"A bigger economic upheaval, Levy says, "isn't about foreclosures," which are making the headlines now, "it's about the spending behavior of those who aren't going to lose homes but have seen their wealth evaporate." Either they don't have as much home equity to borrow against, he says, or they are afraid to spend as they watch the value of their home decline. "

Posted by sold 2 rent 1 @ 08:20 PM (578 views)
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3 thoughts on “Affordability ultimately hits the economy

  • sold 2 rent 1 says:

    “From their peak, home prices in California’s fastest-growing areas have fallen 6% to 11%.”

    “it’s about the spending behavior of those who aren’t going to lose homes but have seen their wealth evaporate.”

    This housing slump won’t be over in 3-4 years.
    It will be a decade of secular decline.

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  • It will be the same in the UK. If we accept that the average £250K house is only worth in reality £180K and we also accept that house prices have been over-valued for the last 5 years then we have effectively got a pile of unearned money that has been spent propping up the UK retail and leisure sectors. Remove this funding and such spending will be severely reduced thus inducing a recession, increased unemployment, lower tax returns for GBH and in turn public spending cuts and more unemployment. Add in falling returns on money purchase pension schemes and all the other extra’s from the strength of GBP through to Inflation and the whole economic shooting match is sitting on a knife edge just waiting to fall or be pushed over.

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  • Ihopeitgoeswithabang says:

    Yes you can bet that when that happens Mr Brown will stop talking on behalf of the treasury and actually let his successor get a word in!
    A big decline is on its way, it always has been, its just been a matter of how big the bubble gets before it bursts.
    There are so many people I know of that have already have debt way out of control.
    The amount of remortgaging that goes on just shows how out of control it all is.

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