In a nation where consumption makes up a significant share of the GDP, that’s not good for the economy.
By Gillian B. White | The Atlantic
Perhaps unsurprisingly, there are correlations between how much Americans’ homes are worth, their overall wealth, and how they spend their money, and these links go a long way in explaining why a crisis in the housing market can so quickly spiral out of control. A sudden dip in home values can leave homeowners feeling poorer and more economically fragile, causing them to reduce their spending in many different ways. When that happens en masse in a country where consumer spending represents nearly 70 percent of GDP, it can be catastrophic for the national economy.