The nation’s store owners, gleefully watching their cash registers whir, are keeping one eye focused on complaints that the housing market is in the midst of a price bubble. Because the real estate market is magically creating trillions of dollars in home equity, borrowing against the old homestead has become a near-obsession.
“But the buying binge could hit the skids when and if housing begins to weaken.” Look no further than Australia for the answer to that. “Australians have all but stopped using their home loans to go shopping. Mortgage equity withdrawal - when people take money out of their home loans to spend - has fallen to almost zero since last year.”
Furthermore, this is noteworthy information reported by a MSNBC Article:
In addition, when the rise value of homes is translated into consumer spending fairly quickly through a well-known "wealth effect." For every dollar of increased value, homeowners spend about 5.5 cents that they otherwise would not have spent, according to one recent study. That translates to $1,100 in spending on a home that rises in value by $20,000.
"You don’t have to have prices fall for the wealth effect to have a bite," said Tornberg, of UCLA. "If houses stop appreciating, then that consumer spending goes away. The very process of prices going flat is sufficient to have a real impact."
There are growing signs that the bubble will be in bursting mode this fall. Given this, consumer spending may fall for this year's Christmas season. It could be the worst Christmas shopping season in many years. A Black Christmas is a real possibility.