House Credit Card is Maxed Out
"Consumer spending slowed in August as housing's slump took its toll."
"Sales cooled in housing-related sectors, suggesting the wealth effect and equity withdrawals from rising home values are wearing off. Purchases of electronics and appliances grew just 0.1%. Furniture sales fell 0.3%."
'"Consumers -- especially those in affluent communities where we've seen dramatic rises in property prices -- can no longer use their homes as credit cards," said Ira Kalish, economist and retail analyst with Deloitte Research. "Those days are over."'
"Stanley Furniture (NASDAQ:STLY - News) cut its second-half profit forecasts late Wednesday, citing weak sales. Ethan Allen (NYSE:ETH - News) and home improvement giants Home Depot (NYSE:HD - News) and Lowe's (NYSE:LOW - News) also have made gloomy comments in recent weeks."
"Building material sales rose 0.1% from July, but these typically lag housing starts as construction plans are made well before buying supplies. Year-on-year growth has slowed in recent months."
"Upscale housewares chain Williams-Sonoma last month cut its 2006 profit target because of softening sales."
"Kalish said that if home values fail to rebound and consumers continue to rein in spending, the U.S. economy could even fall into a recession next year."
'"It's hard to see anything that would compensate if there is continued weakness in the housing market," said Kalish. "Exports and business spending are not going to do the trick."'