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Consumer Contraction...



November 19, 2008 – Comments (2)

Boy, am I behind.  This one is from 5 days ago, with retail sales showing a decline of 2.8% over September and 4.1% over October a year ago.  I love the title, Conspicious Correlation.

Anyway, the author is making the argument that retail spending is proving to be correlated with the housing market.

No question in my mind that people were spending more as they felt worth more as their homes went up in value and now that they are declining, well, they will spend less.  The "I am going to down grade and bank the difference for my retirement plan" has taken a huge hit and people's behaviour will change accordingly.

2 Comments – Post Your Own

#1) On November 19, 2008 at 10:29 AM, ByrneShill (84.72) wrote:

Funny how I've always seen it more as "I'll stop paying for that drywall someday then I'll have 800$/month of avalaible cash to burn somewhere else."

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#2) On November 19, 2008 at 2:33 PM, dwot (29.71) wrote:

Maybe it is just me, but I always thought of my home as part of my retirement nest egg that gave me the ability to pull cash by down sizing.

With 30 year mortgages and late starts buying that first home many will practically be retirement age before they manage to pay off their mortgage.

Living in a very expensive city I was looking at more like $1800 per month for the next 20 years to pay off my home.

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