I have never been a huge fan of surveys about what people say; I've always thought people's actions were far more important. Who wants to sound like a grump? But when people are spending less, it means that much more.
Before we get any further, let's make an assumption: people buy houses and cars when they are feeling more confident about the future. This has been a standard line of economic reasoning for awhile. People need to feel confident about the future in order to take on a financial responsibility that will last at least 5 years.
If the preceding statement is true, consumer confidence may not be that high. According to Barron's pulse of the economy we have the following year-over-year figures for car and new home sales.
Total domestic auto sales totaled 567,880 one year ago and 520,946 in February 2007. That's a drop of 8.42%.
Total light truck sales were 692,929 in February 2006 and 694,297 in February 2007. That's an increase of .18%.
New home sales were 1,197,000 in January 2006 and 937,000 in January 2007. That's a decrease of 21.72%.
There are other possible reasons. For example, maybe all of the household debt is starting to slow the purchase of durable goods. Considering the sky-high levels of debt in the economy that may be a possibility.
But whatever the reason, we know people are backing away from big-ticket purchases. That may mean people aren't feeling all that confident right now.
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4 comments:
Does that domestic auto sales figure really mean much though? If I buy a Toyota intead of a Ford, that number goes down but doesn't speak at all to consumer confidence.
That number includes imports and domestics.
Our real estate guy told us last week not to put the house on the market! Man, what does that tell you? And we live in K'port ME where sales have been moving right along in the last year. It has slowed here as well.
Toured my first "flipper" foreclosure today.
$3 million mortgage, $600K in interest and penalties so far (ho ho ho if the lender thinks they'll get any of that back).
some bright spark bought a 30 year old house on the ocean, painted very nicely, put in a bit of new cabinetry etc etc. but no matter how you slice it, it's a 2000 ft2 house built to a low standard 30 years ago.
3/4 other houses/lots on the same street for sale. One is a $6.5 million estate sitting empty (for months now). The nut on that mortgage must be fun to cover too.
I feel for the average joes who over reached to own their own home, but these folks--not so much.
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