Not out of the woods

A recent survey of consumer spending indicates two things; we are not out of the woods yet and home buyers are being more cautious.  Some analysts believe the decline in applications for home loans (currently at a 13 year low)  would indicate that we are not turning around the economy.  Yet others are more optimistic because the stock market seems to be rallying. 
Consumers are frightened they ALL know someone who’s house is  in foreclosure.  They ALL feel the pinch of lost jobs.  Therefore they are not willing to take that first leap.  The Federal Tax Incentive which gave the economy a huge shot in the arm is back on the table. 
“Senate Majority Leader Harry Reid, D-Nev., said Thursday (June 10, 2010) he wants to give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.”

Although the pattern has been that if the Real Estate market is doing well than we all do well.  This theory does not always hold water.  As I have mentioned in previous blogs, it is a catch 22.
Consumer MUST spend to stimulate the economy.  All the government incentives in the world will not be enough if the minute they end the American people go back to being conservative with their money.  Don’t get me wrong.  I understand why they are conservative.  “Once bitten twice shy”. 

Spending is the only way to generate jobs.  A home owner buys a house, the builder gets paid, he pays his worker who goes out and buys groceries for his family, the stores get busy they hire more workers, the new worker at the grocery store is making a little more money then he did on Unemployment so he goes and buys a car, the car manufactures, the sales man, and yes even the taxes get paid and generate more money for spending.  I don’t have to draw you a picture but my point is we NEED to spend and we need to figure out a way to encourage others to spend.

Bill Clinton said it best! “It’s the economy stupid.”  All the bells and whistles of sale incentives, tax breaks, health insurance or paper legislation won’t do much except for those with stable jobs!  Tightening of credit from Banks, Fannie Mae and Freddie Mac along with poor reporting of consumers on Credit Reports with Credit Bureaus is a contributing factor.

The majority of our legislators don’t understand the mortgage business. Housing is the engine of the economy and jobs are it’s number one fuel.

Steve Hillyer