If the "wealth effect" that led to all those Hummer H2s, Tahiti vacations and Ethan Allen shopping sprees has now dried up, and is actually declining (the "poverty effect?"), I'll just wait for the NAR, Harvard and David Lereah (there's a group that should be tarred and feathered) to issue a follow-up report how the Poverty Effect is now collapsing consumer spending...
A recent study by the Joint Center for Housing Studies at Harvard University and Macroeconomic Advisers, LLC, concludes that housing wealth has a greater effect on a consumer’s spending habits than his or her stock wealth.
According to the study, which was commissioned by the National Association of Realtors (NAR), consumers are more confident about their appreciation of home value than their gain in the stock market because they realize near-term gains in a stock market may not last.
"Housing produces a quicker lift to the economy, while home-price growth provides lasting benefits," said David Lereah, chief economist of the NAR. "Homeowners are more confident of gains in housing wealth, so they spend more readily and quickly when they occur."
Lereah does not seem to be concerned about a housing bubble.
"The fundamentals of a growing population, tight supply of homes available for sale and rising construction costs will support home prices moving forward," he said.
July 04, 2006
HP 2004 Archive: The corrupt David Lereah, Harvard and NAR saying housing wealth drives consumer spending
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12 comments:
what goes up must come down. if spending drove it up, lack of spending will crush it
Ya know what sucks?
While all that bling (Hummers, boats, RVs, Bimmers, yada yada) will be dirt cheap in a year or two, none of it really interests me, even if I could get it for 10 cents on the dollar.
"Anonymous said...
Ya know what sucks?
While all that bling (Hummers, boats, RVs, Bimmers, yada yada) will be dirt cheap in a year or two, none of it really interests me, even if I could get it for 10 cents on the dollar."
God, I can so relate! I feel sometimes that I am missing out because I am not acquisition oriented to the max. Keeping up with the Jones. What the hell for?! Soon to be going DOWN with the Jones! Who needs it!
My new outta state exec neighbor just gave his twin sons brand new SUV's (one each) for their sixteenth birthday! What, not enough to just get a license and use of the family car! Good grief, this long slow death is going to be awful!
The real trick is how they turn us into consumers.
My neighbor became RE Broker 4yrs ago has 10 properties with ARMS I told him the only thing that should have 10 ARMS is a Hindu God.
Has a Hummer and a Benz.
He just purchased a new Home
5 months ago at the top of the market I would bet its an ARM also.
Bling Bling is only blining when the thing ur in.. u can afford.
My other neighbor quit his job with ATT 4 months ago to became a Mortage Loan Processer . Bad timing.
Tight supply of houses. . .can we say "Tripple Up?"
Hey. . .the Mexican-American familes have been doing this in California for years (also many Asian families). . .to afford a house, they move two or even three families or generations into one house. . .think what would happen to that "tight supply" of McMAnsions if other groups started doing this. . . .ZAP. . a few million more houses go on the market.
I am the opposite, most likely owing to losing money on a house early in life in the late 1980's bubble.
I have been lucky enough to have had times in which I had a single stock go up big, and my house has gone up big (now, owned for 8 years). I will say, I felt "richer" when the stock went up since I could sell portions of it and turn it into real cash, toys, (and tax payments ;-(
Now that my house has gone up, I don't feel it since I still have to live in it. Unless I want to downsize or move to a remote area, I am stuck on the current treadmill, so I assume my houses current value can not be accessed, and may be a lot lower in the future if I want to move....
You can sell a portion of a stock holding any (trading) day, but I can't sell part of my house. I don't count using margin to borrow against the asset selling... (I never margined stocks either, just sold a portion outright)
RE: Hummers and other bling for .10 on the dollar...
Yes, some goods become "anti status" when they associated with certain groups or behaviors. For example, I will not go near an Escalade for what they represent, even though I have the cash. I will keep my Tahoe instead. And I am not talking flagrent wealth here, but the "hood" mentality by the rap and sports stars, and all the wanna be's, even if they only live in Suburbia, but still wear their hat backwards and listen to M+M... (I actually like the M+M music, not the lifestyle)
Off track here, but I am an auto enthusiast, and have noticed in the past a pattern of who buys certain cars. It used to be that real rich people bought new Jaquars, since they could afford them, and they were under warranty for 3-4 years. After this period, they bought another new once since they did not want to deal with the problems.
Problem is, the lesser "rich" person gets sunk by high $$$ repair and maintance costs that are not under warranty, so the price on these plummet, making them interesting to people who want to show the status. This was mostly true for the older original Jaquars in the early 1990's before Ford bought them and turned them into (more reliable) Tauruses.
Same goes for BMW 750 series as well. (Nice car, but a painfull cost in repairs)
My predictions:
- David Lereah will blame Ben Bernanke for the housing downturn. (He has already warned that BB shouldn't raised Fed rates...as if there was actually some direct correlation between Fed rates and mortgage rates, which there isn't.)
- The REIC will blame the media for bringing about the coming recession, due to the media reporting negative articles about the housing market. (Never mind that journalists are simply reporting what is actually happening, and the good ones are actually quoting people who actually understand economic trends and are unbiased sources, unlike realtors and Bob Toll.)
Home price growth provides benefits to the economy?
What a dufus David Leraeh is.
Anyway, he's already changed his tune.
He admitted last week on CNBC that housing was going down in areas of the US where the economy isn't strong.
From that, I think we can conclude that housing is going down everywhere in the US.
Cannot think of one single place where wages are rising to meet this bubble.
Buh-bye Bubble, hello suds.
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