The 2020 Mid-Year Economic Update_long

The Impact of the Housing Boom – and Bust – on Consumption Spending

An article in BusinessWeek reminds everyone that markets are local - as most independent distributors know very well. It points out: "You'll know we're back to an ordinary, boring real estate market when buyers focus less on the intricacies of foreclosures, short sales and the like and go back to the things that used to matter most: What are the schools like? How quiet is the neighborhood? When am I going to have to replace that roof or cut down that diseased oak?" Demographics shifts, employment growth and so on drive local housing markets because after all, "there is no such place as National Median, U.S.A.," the article says.

In related housing news, ...

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An article in BusinessWeek reminds everyone that markets are local – as most independent distributors know very well. It points out: "You’ll know we’re back to an ordinary, boring real estate market when buyers focus less on the intricacies of foreclosures, short sales and the like and go back to the things that used to matter most: What are the schools like? How quiet is the neighborhood? When am I going to have to replace that roof or cut down that diseased oak?" Demographics shifts, employment growth and so on drive local housing markets because after all, "there is no such place as National Median, U.S.A.," the article says.

In related housing news, some interesting research from Manufacturers Alliance/MAPI: "The Impact of the Housing Market Boom and Bust on Consumption Spending." It looks at the impact of changes in housing wealth on aggregate consumption.

According to MAPI, the housing boom and bust have had a significant macroeconomic impact:Increases in real estate values added an estimated $644 billion to U.S. consumption spending from late 2001 to the end of 2005, or over 35% of the total consumption during that period. Conversely, falling real estate values accounted for approximately 40% of the $236 billion drop in consumption in the fourth quarter of 2008.

And the National Association of Home Builders reported this week that single-family home builders remain cautious, as the NAHB/Wells Fargo Housing Market Index dipped 1 point in June. Says NAHB Chief Economist David Crowe: "As expected, the housing market continues to bump along trying to find a bottom. Meanwhile, builders are taking their cue from consumers, who remain uncertain about the economy and their own situation. Builders are also finding it difficult to complete a sale because customers cannot sell their existing homes."

Regionally, the NAHB survey found most of the weakness concentrated in the South.

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