Question by wqoeirmfd: Why does slump in real estate market causes lower consumer spending?
This is a statement I heard very often in the news nowadays. For most people who are not subprime mortgage borrowers, lower house price means one has to save less to buy a house in the future. Isn’t that a better situation? Why should they spend less? Probably this crisis will affect many construction workers. But how many people are working in construction industry.

Best answer:

Answer by MaryCheneysAccessory
So many people have used the equity in their home as an ATM machine to increase their spending. When there is no equity, there is less consumer spending.

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