Economists in the United States are taking the position that falling home prices are a significant problem preventing the economic recovery in the United States. The devaluation of homes in the United States has cost Americans billions of dollars. The declining wealth of American homeowners has had a further negative impact on their confidence that the financial situation will improve in the future.
Richard Curtin, Professor of Economics at the University of Michigan, recently stated “people don’t expect their home to regain value, and that’s really lead to a change in consumer attitudes about the economy that we’ve just never seen before.”
Americans have a confidence problem in their future of their country. They no longer believe that the economy will necessarily improve and financial circumstances will get better. The average income of many American families has declined. The unemployment rate is still over 9%. The expectations for economic growth among Americans have fallen to one of the lowest levels in history.
The Decline of the Real Estate Market
Recent studies by economists have shown the decline in the real estate market affecting all aspects of consumer spending. It is estimated that Americans reduce their spending by $20-$70 a year for every $1,000 decline in the equity in their home. During times of appreciation in real estate, there was a “wealth effect.” The wealth effect made consumers feel that they had liquidity and, therefore, they spent more money. Often more than they actually had. The down side of the wealth effect is, as home values have declined, consumer confidence has declined and there has been a negative reduction in the wealth effect. In other words, consumers feel they’re getting poorer when their houses go down in value and are less inclined to spend money.
Economy Will Eventually Recover
The prevailing view among the economists is that even though things do not look good right now, the economy will eventually get better and Americans will start spending again. Hopefully, appreciating real estate prices will spearhead the economic recovery.
The foreclosure lawyers at the Law Offices of Schlissel DeCorpo can help you if you have a foreclosure problem. Our foreclosure defense lawyers litigate defective mortgages, defective foreclosure lawsuits, predatory lending and all other types of real estate related matters. We can explain the federal laws on foreclosure and how they affect you. We attend foreclosure court conferences for our clients.
In the appropriate situation, we will discuss foreclosure related bankruptcy issues, such as filing a Chapter 7 and a Chapter 13 bankruptcy with you. In bankruptcy situations, there is an automatic stay that goes into effect, ordered by the court, that stops foreclosure from moving forward. In some bankruptcy situations, we can eliminate second mortgages. At the end of the bankruptcy, we can assist you inre- establishing your credit. Feel free to set up a free consultation with us. We will discuss your foreclosure options with you.
