Sunday, January 27, 2008
what does slump mean to consumers
--If the economic slump is in the cards, and recent gyrations suggest for it, it is guaranteed to hit people where it hurts: in the wallets. The issues can be complex, with scary words "recession" being bandied about, no to mention the insurgent inflation. Housing: --the previous cycle, housing market has been part of the problem and also part of the solution. The falling housing price helped tip the economy over. The resulting lower interest rate rekindled growth. --It isn't going to happen this time. First, the current glut of homes will delay new-home construction. Second, housing prices, though they have fallen in many places, could still fall further because the dour mood engendered by a recession will keep a lid on the home-buying market. Finally, many would-be borrowers will be locked out of the mortgage market. --But mortgage rate will be lowered to approximately 5%. --Inflation will be a potential kink. Consumer Credit --Rates on credit cards, home-equity lines of credit and car loans are getting cheaper --Already, a one-year certificate of deposit yields less than 3.8%, according to Bankrate.com, and will go lower as the Fed cuts rates more.