Will Foreclosures Actually Stimulate the Economy?
Right now, the news is that Americans are gaining confidence in their personal finances. Spending was up in May (not surprising, since that’s when the economic stimulus payment checks started going out), and consumer confidence is showing some improvement. While I think it is too bad that we require a government handout to feel better about where we are at financially, there is no denying that it is helping stimulate some economic activity.
And in coming months, we may see even more economic activity. Over at Money Talks, this speculation has been made:
We live in an era where disposable income is king. Americans feel more urgency to pay down credit cards than to make payments on a home that is underwater. The fear of foreclosure is quickly replaced by the freedom of additional spending money. This newfound money will provide thousands of dollars a month to those consumers struggling to pay the extra $100 a month on gas. There are three things that you can always count on: death, taxes, and the resiliency of the American consumer.
We proved it last month: When we have disposable income, that is what is important to us. It’s why we work more than any other developed country (we even have less vacation time than workers in China!), and why we have more consumer goods than anyone else. We like having money — and we like spending it more.
Will this wave of foreclosures really cause us to change our idea of the American Dream? It used to be owning a home. But paying rent, in most cases, actually provides us the opportunity to have more disposable income every month. The idea of owning a home (and it can represent a huge drain on monthly income — with property taxes, mortgage payments, repairs, etc.) is becoming less attractive than it once was. And this housing market crisis is only underscoring the fact that homes can cost more than they are worth.
What do you think? Do you think that foreclosures will lead to an economic stimulus? Do you think that home ownership is becoming less desirable?
Tags: foreclosures, housing market crisis, home mortgage loan, mortgage loan blog,
disposable income, mortgage payments
