What Does Housing Crisis Concern Mean For Economy?

A consulting firm in Chicago, the Spectrem Group, reports that until August, U.S. residents with more than a $1 million in investment assets were shrugging off worries about the housing crisis. But now the rich too have caught the property jitters, with 43% saying it is their biggest investment worry, up from 9% in May.

Their concerns are valid...the S&P/Case-Shiller index of U.S. home prices plummeted more in the second quarter than at any other time in the past two decades.

What does this mean for the economy? Government statistics show that those in the top income quintile account for 39% of all consumer spending, which in turn has driven 70% of gross domestic product (the value of all the nation’s output of goods and services).

If the rich pull in their horns, fretting about the value of their real estate, it could have an outsize/negative effect on the economy, which would be bad for everyone.

In the past, however, recessions have historically been a boom for the barter industry...as companies of every size and description seek the additional business from trading to overcome the slowdown in the cash marketplace.

Expert Contends Housing Recession More Severe Than People Realize

Ivy Zelman, 41, a former housing analyst at Credit Suisse, warned about the housing crisis months before the downturn. Now on her own, as head of research firm Zelman & Associates, she sees this recession in housing as more severe than the 1990 and 1991 downturn and believes it could have a much broader impact on the economy than people realize...lasting longer in duration and causing the consumer to “roll over.”

Zelman was one of the first Wall Street analysts to question bullish home builders, showing concern over the flood of speculators buying new homes and the problems posed by subprime mortgages.

In 2006, The Wall Street Journal ranked Ms. Zelman the top homebuilder analyst in their “Best on the Street” survey. Prior to working at Credit Suisse, she worked at Salomon Brothers focusing on housing.

Rating Real Estate Gurus

Real estate investor and newsletter publisher John T. Reed, keeps tabs on the many leaders of real estate seminars...those gurus who supposedly have the answers and ways to reach real-estate riches.

But Reed contends that the real estate information business is presently dominated by people who push their seminars and mentoring services out of boiler rooms—and most don’t provide the content promised. In the ‘60s and ‘70s, he says all were legit and sincere, although admittedly, some were better than others.

If you’re looking for information on the current real estate purveyors of seminars, Reed, who is based in Alamo (CA), lists and rates more than 130 real estate and financial gurus on his web site www.johntreed.com.