Most Americans have the majority of their savings tied up in their home. Beyond making a mortgage payment, few savers are able to put away excess income. The government encourages saving in homes. Mortgage interest is tax-deductible. Credit card interest is not. Profit on the sale of a residence is tax-exempt up to $500,000. Government programs support firsttime buyers and lower interest rates for low-income homeowners.
Realtors play up the savings aspect of homeownership. Savers are shown charts of home appreciation and tax savings compared to renters. This leads to overconfidence. Despite government support, a family home is an erratic savings vehicle.
The value of a dollar invested in a family home is not fixed. Home equity can swing up and down. When the local economy is bad, homeowners who lose their jobs often find out that they have lost all the savings in their home as well. In the late 1980s, the oil belt recession forced a massive loss of both jobs and homes. In the early 1990s, New England had a similar episode caused by the collapse of the real estate industry. The massive closing of military bases and defense plants a few years later caused thousands of Southern California residents to lose both jobs and homes. When a
home is worth less than the mortgage, even employed homeowners have lost all their savings.
The global financial crisis spreads, and thus also pushes on private consumption. Therefore, warns the Society for Consumer Research for the year 2008 before a stagnation in private consumption and thus facing a higher risk of recession.
The Society for Consumer Research (GfK) has in the recent publication of these growth forecasts from an initial 0.5 percent to the current 0 percent and thus a reduced stagnation. This was announced at the company GfK in Nuremberg with 25.08.2008. However, there are also some hope at the dark sky, because the company could announce that the downward trend of consumer sentiment has deteriorated further. Therefore, increased the forecast for the GfK consumer climate indicator of 1.8 points in October after 1.6 points in September.
The GfK had, however, the announcement of the figures admit that the surveys of consumers before September 15 took place. This morning, 15.09.2008, is probably as a black day for banks in history. Had the surveys of consumers after that date took place, then perhaps the consumer climate substantially worse and the index would have done no improvement. Its impact will be in the index for the month of November are introduced.
According to the GfK reports have therefore been the economic and income expectations of consumers in the month of September improved significantly, however, the outlook for the German economy (recession looming threat) is still very negative. Many citizens are even planning major purchases within the next few months, so retailers never so bad Christmas business may emanate. Reasons were partly falling costs for energy and gasoline.
About recession and stagnation
A stagnation of the economy means that no growth achieved neither positive nor negative sense. The economy and hence the economy of a country occurs on the body. Worse than a stagnation, a recession in the economy (economic performance) of a country is reduced. This would have a negative impact on individuals and not just on the economy of a country.