My Home Depot

Do you think the stock market losses affected people building, buying homes first or do you think vice versa?

why so for this?? and how about jobs ? jobs go first and then people quit buying things, affecting stocks or does it initiate with stocks being sold first than jobs being cut back and then spending?? please explain your views. how is this logical.? Thanks for your answers!

Public Comments

1. Traffic jam. Someone slows to look at something and pretty soon all are gridlocked. Bush sucked as a president but the world chugged along. USA went into debt paying for the war. Folks slowed down on their spending to see who would become the next president. So many talked about I need this, but I will wait until after the elections. So many said I need a new car but I will get a used one because I don't know what is going to happen. Banks got scared of the slow down. Stopped loaning money. People who couldn't afford houses had bought them with this evil trick called Adjustable Rate Mortgage. They were good at $850 a month. Payment went up to $1250 and they could no longer pay. Banks were even more nervous. Nobody can get a car loan. Nobody is buying homes. Prices go down. Nobody wants to build a new home they can't sell. Builder's employees are out of work. They can no longer go out there and purchase. Slower and slower the machine goes. Many houses and cars for sale. Realtors and sales people are making no money. So they cannot go out and spend as usual. Slower and slower. Stock prices go down because the companies are not making money. People have less work and less money to put back in the machine. It slowly grinds to a halt. Waiting to purchase based on who becomes president next. Buying houses we cannot afford. So much money leaving the country and not coming back. Many causes. It is not over yet. Maybe by next August we will hit bottom. Then it will slowly start to heal. Like the Traffic Jam. Once the cars at the front start moving again. The guys in the back still have a long wait until they can get going with their lives again. We just have to wait.
2. neither. Building or buying a home is set with three things that must be proved to any underwriter. Capacity to service the note, collateral, and credit. The only thing the stock market does is place a value on the company's as traded. Now some company's will experience down turns and some will have upswings yes even in this economy. Many have made a choice to stop spending on WANTS and this is a good thing and always has been. Many are not using credit and that is an even better thing. But every dollar spent whether on wants or even needs effect many people who get to keep jobs and maintain a standard of living. Many companies will consolidate positions to off set what the press is saying and yes people will loose jobs because of the press. The biggest problem with the press is they report what they choose to report and do very little research on what they report. The stock market is no worse than it was in the Clinton erea and jobs the same but they are not reporting that are they? Yes the big 3 are failing but it is the union and advertisements as well a their products that have done them in as well it should. They must improve quality in order to survive in a free market. They refuse to do so so let them go bankrupt and kill the union so they can start over and build quality and have just wages for employees not what they are paying now.
3. People building were first to be hit when defaults on mortgages became an epidemic. The banks had to stop lending immediately because they were facing bankruptcy if they did not. Stock prices started to tumble when the market realized that banks were cutting back on financing of homes and automotive, but of course the financials led that down because their equity had disappeared. They even had to default on bond redemptions. Jobs started to disappear in the building trades, not when projects were not being started, but when jobs already started were being left incomplete. That is, the first thing that happened is that builders tried to get jobs completed to be sold, while starting nothing new. But many of those were stalled because the banks could not advance another dollar. As this was happening, big ticket items like cars were not getting financing, and the stock on dealer lots went unsold. Salesmen are implicitly redundant when one can not get financing. Stock prices were also hit as a result of closing out long positions to pay off margin accounts. This was particularly the case for the futures market, the commodity, heavily into margin. Stock market declines do not have a significant effect on jobs, but loss of jobs and slowed economy that goes with it does drop stock prices. Spending does not respond heavily to loss of value in the stock market. So few of us have much exposure to the stock market. But spending does contract with loss of financing, particularly when big ticket items are concerned. Job cuts will affect spending. Government sale of bonds does have a lot to do with this, because it takes money out of financial markets and thus sets off the whole downward spiral. We did have a lot of off shore withdrawals, as their economies wound down. But those withdrawals came so much as a reaction to a drop in liquidity globally. Large government borrowing (selling bonds) was a large part in reducing liquidity.
4. building is affected by the credit market..no credit means no money for the builder so no building takes place which means people will loose jobs and the will not spend as much which will affect the consumer market which inturn affects the stock market...but a regular stock market crash will affect people in the job market..no jobs because companies loose money..
5. If somebody's 401k shrinks, they feel poorer, so they don't wany to spend as much on a house.