Is the still struggling U.S. housing market, with its high rate of foreclosures and plummeting home values, destined to send consumers to debt consolidation loans in the years to come? Will the residential housing slump continue to act as a drag on the national economy’s recovery? A recent story by the Chicago Tribune suggests that “yes” is the answer to both questions. And for anyone hoping that the fragile economic recovery will soon pick up momentum, this comes as bad news.
The Housing Market’s Woes
The residential housing market has wreaked havoc on the health of the national economy since it started to slump in late 2006. Last year, for instance, the United States saw a record 2.8 million foreclosure filings made against properties, according to foreclosure data company RealtyTrac. Now comes the news that housing sales slumped in May, thanks largely to the expiration of the first-time and move-up homebuyers tax credits on April 30. Even worse, the Mortgage Bankers Association reports that housing values are continuing to fall. The Tribune story quotes the bankers as saying that the national median home value reached an eight-year low earlier this year. And when U.S. consumers feel pressured, they don’t spend.
Confident Consumers Needed
The U.S. economy needs confident consumers to thrive. If consumers aren’t spending money at shopping malls, restaurants and hotels, the national economic recovery will continue to be a painfully slow one. And with housing values falling and foreclosures rising, there’s no reason for consumers to boost their spending. They’re still wisely in saving mode; they’ve learned an important lesson during the Great Recession about the value of socking money away and not overspending. Other consumers who have lost their jobs or who have seen their annual incomes fall may be turning more frequently to debt consolidation services. These loans will help consumers slash away at their debts. But they don’t make for confident consumers; it’s hard to picture consumers who’ve just taken out debt consolidation loans heading to their local electronics store to buy a new flat-screen TV.
None of this is new, of course. The housing market has always had a major impact on the fortunes of the U.S. economy. Remember after Sept. 11, 2001? The strong housing market helped pull the country out of an economic slowdown. Now, the housing market is having the opposite effect. It’s pulling the country’s economic recovery down. Consumers won’t resume their spending until they’re confident that they can pay their mortgage loans, that they won’t lose their residences to foreclosure and that their homes will finally start rising in value again. Unfortunately for the country, it doesn’t seem as if this will happen any time soon.