Higher interest rates and energy costs, along with fewer homes for sale at affordable prices, have caused the housing market to slow down.
The building of homes is also in bad shape. There is an oversupply of housing when there are more houses on the market than there are buyers. As the market softens, fewer homes and apartments will be built, fewer building materials will be bought, and fewer people will work in fields related to building.
Consumer spending and the growth of the economy depend on how much people spend on real estate.
In 2006, the Federal Reserve raised interest rates to try to keep inflation under control by making it harder to get credit.
For the economy to grow, efforts must be made to lower inflation without putting the economy at risk of a recession.
Prices for crude oil keep going up, and the war in Iraq shows no signs of ending. High gas prices are hurting the market, and worried consumers are wondering when the world's energy problem will be solved.
When people spend more on gas, it hurts their ability to buy things and changes how they feel about spending.
Why should rising energy costs make it harder to sell a house? A new pattern seems to show that when gas prices go up, home sales go down. When prices go down, sales go up.
With rates going up and energy costs going up, the economy could be hurt in many ways.
Even though the economy is slowing down, the N.A.B.E. (National Association for Business Economics) says that the Gross Domestic Product (GDP) of the United States will grow in 2007. And that even though core inflation is expected to rise by 2.8%, food and energy will not be included in the rise.
If inflation pressures go down, the Federal Reserve won't want to raise interest rates any more (however, high gas prices, and other commodities have the potential to sustain inflation pressures).
So, Carlos M. Gutierrez, the Secretary of Commerce, says that 2007 should be a year when Americans feel hopeful about growth and prosperity.
Merry Christmas!
If you want to know my opinion or ask me a question, write to me.
"Your" Money Is Important
Through Carl Hampton
"From Credit Despair to Credit Millionaire" author.
