Re: Fixing the Economy - Affecting Stock Market and Housing
polymermom Wrote: ------------------------------------------------------- > The way I see the stimulus package presented by > the government is that households across America > will receive some money and hopefully that will go > back into the economy and generate consumer > spending, company profits, and higher wages/more > jobs. > Yep! The > stimuluseffectivenessassumes that > people have savings and manageable debt. If > that's not true, the money will go towards putting > oil in the fuel tank, gas in the car, or > paying debtsfor another month or two. > The only reason the price of goodsare > lowered is lack of demand. That only hapens > in an economic slowdown or a chane in technology > that lowers demand. > However, you need to consider the time frame > involved. Also, interest rates are not a > closed system in the US. There are external > factors - such as foreign investors. If the > US really needs capital and it has to attract > foreign investors, interest rates could increase > before the average citizen feels solvent enough to > buy a home. BTW, it's still cheaper to rent > than to buy.
It's purely psychological. The "housing market" is really the "real estate" market which accounts for a lot of money. There is also a lot of related industries which is affected if the real estate market goes down. First is the home builders or construction industry (contractors), then there is the materials suppliers, then the mortgage industry which makes loans to buyers and then there's the real estate agents, title companies, escrow companies, home insurance companies, furniture companies - all their jobs hang on how well the housing market is doing. They were in fear for the past 2 years when the housing or real estate market peaked and began sliding down. Investors in the stock market finally decided that there is too much fear and decided to sell their stocks. Selling causes the stock market to drop.
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