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Friday, January 2, 2009

Real estate vs U.S economy crisis

Real estate contributes a total of 10% output to US economyt. If real estate declines, it affects the constuction field.More and more people will loose their construction jobs, thus potentially increasing unemployment.

Real estate sales and prince are related.If real estate sales declines,it eventually leads to a decline in real estate prices too.Value of Homeowners homes will drop at the same time,doesnt matter whether they are actively selling it or not.This then reduces the amount of home equity loans the homeowner can get. Thus, reduces consumer spending.

According to reports and statistics,over 70% of the U.S. economy is based on personal consumption.If consumer spending decreases,it will contribute to a downward spiral in the economy. This results in further unemployment, further reduction in income and consumer spending. If the Federal Reserve doesn't intervene (by reducing interest rates, then the country could fall into a recession. The only good news about lower home prices is that it lessens the chances of inflation.

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