Consumer Spending and Housing Correlation

Tuesday, January 10, 2006 | 10:10 AM

Historically, consumer credit has roughly tracked overall changes in house prices. In other words, the consumers' ability to borrow -- and then go out and spend -- has been highly correlated to real estate changes (and hence, the importance of interest rates).

In the attached chart, courtesy of Michael Panzner at Rabo Securities, the year-on-year changes in the U.S. Office of Federal Housing Enterprise Oversight's quarterly house price index is overlayed on a graph of consumer credit outstanding as a percentage of nominal GDP.

In a healthy environment, you see real (after inflation) wages rise, and consumer spending going higher along with that.

In a stimulus-driven environment like we've enjoyed for the past three years, instead of real wage growth, there's been a lot of consumer borrowing propelling their spending.  I expect as the borrowing slows down, so too will the consumer spending.

I don't see how to put a positive spin on that.

>
click for larger graph

011006ritholtz

Source: Mike Panzner, Rabo Securities

Tuesday, January 10, 2006 | 10:10 AM | Permalink | Comments (0) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00d8355acc5969e2

Listed below are links to weblogs that reference Consumer Spending and Housing Correlation:

Comments

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner