NAHB says households still on tight budgets

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NAHB says households still on tight budgets

Federal data indicates that individuals continue to shy away from taking on new debt while they deleverage, or pay off debts and restore net worth to norms, according to the Eye on Housing blog. [1]

A consequence of deleveraging is an elevated personal savings rate, which holds down levels of consumption and investment and slows economic growth. The National Association of Home Builders (NAHB) has pushed back its forecast for when household balance sheets will return to historical levels relative to income. The current data, and ongoing stock and housing price declines in the second quarter 2011, suggest that the historical level for household net worth will be reached in the fourth quarter of 2011.

Over the long run, the rate should return to the 3 percent to 4 percent range, thereby freeing household budgets for consumption and investment and promoting more robust economic expansion.

For more information: www.eyeonhousing.wordpress.com/2011/06/10/households-continue-to-deleverage-mostly/ [2]