From the Palm Beach Post, some insight on the housing/consumer spending relationship:
'Ask Nancy Bagley about the relationship between the housing slowdown and her net worth, and the Delray Beach homeowner is emphatic.
"Absolutely, I feel less wealthy," says Bagley, who works as a business consultant.
It's a sentiment shared by many homeowners in Palm Beach County and the Treasure Coast as the once-sizzling real estate market cools.
The median price of a single-family home in Palm Beach County fell 12 percent from October 2005 to October 2006, the Florida Association of Realtors said last week, while national home prices dropped a record 3.5 percent for the year. An increasing number of home sellers are getting less than they paid for houses bought last year or earlier this year, according to Palm Beach County property records.'
And for the US...
'As the U.S. economy enters the crucial holiday spending season, retailers and economists are struggling to make sense of how the end of the historic housing boom will affect the annual buying binge.
The consensus: The housing slump won't help holiday spending, but Americans will continue to consume as they always do.
"We should see some effect, but not a big one," says Christopher Carroll, an economist at Johns Hopkins University.
Carroll is one of the few economists to put a number on how changes in home equity affect spending. In a recent study, Carroll and two other economists conclude that for each $1,000 of increase in a home's value, the owner will spend an extra $20 in the short term and $90 over several years.
And as home prices decline, consumers will cut spending by the same amounts. So big drops in housing wealth would "substantially" hurt consumer spending, Carroll says.'
And what about our big retaillers?
'A week into the holiday shopping season, the signals are mixed. Stores were slammed on Thanksgiving weekend, although 5 million fewer Americans braved long lines and crowded parking lots this year than last, according to the National Retail Federation.
Wal-Mart Stores Inc. spooked investors when it reported November sales were worse than expected, and Gap Inc. and Abercrombie & Fitch also reported sales declines for the month. But Target Corp., Costco Wholesale Corp. and Federated Department Stores Inc. all posted healthy sales gains for November.
Mixed signals aside, economists agree that retailers can expect another year of frenzied holiday shopping, although some warn that the housing slowdown will eat into consumers' ability to spend.'
Personally, I continue to wonder how the "concrete-feet" effect of screwed sellers and amateur spec-u-vestors is having on the shopping season. I know of several "For Sale" properties in my area that are owned by persons who really can't afford the carrying costs, and are barely getting by. As such, I will be keeping tabs on the final sales numbers for the 2006 holiday season, because it should be a very good barometer for the 2007 economy.
'But now that home values are slipping, is there a reverse wealth effect that threatens to silence cash registers? Tough to tell, says Bill Hampel, chief economist at the Credit Union National Association.
"We've asked consumers that numerous times, and we don't really get much," Hampel says. "I'm not a big believer that these fringe items (such as the wealth effect) have much of a role in holiday spending."
Yet Hampel says the housing slump means homeowners will have to start saving the old-fashioned way, rather than continuing to spend more than they earn.
"Our houses have been doing our saving for us for most of this decade, and that is ending," he says. "But most people's net worth is so far above what they expected it to be that they don't feel they have to start saving. It's sort of like easy come, easy go."'