How does the lower house prices have a negative affect on the U.S. economy?

Question

If can please include sources.

Also if you were a fiscal policy maker how would you correct this problem?

Answer 1

Much of our wealth comes from our homes.  So, as the housing marketing has been dropping so has our wealth, all other things  equal.  This has more impact then I'd care to get into...on both the micro/macro level...Use some intuitive thinking and I'm sure you can come up with some answers...

Fiscal policy?  Heavy deficit spending (Focusing on stimulating the economy, i.e. rebate checks, WPA anyone?)

Answer 2

Falling home prices mean less return on investment for real estate investors and lower profit for home builders.

However, high home prices may prevent their sale, which is zero profit for home builders.

Home prices falling too far means home owners may lose value in their home, and may still have a mortgage contract to pay the higher amount.

Other than the direct effects to investors, and aside from prices dropping significantly, a lower home price is not a problem. It makes them more affordable for the consumer, in turn easier to get loans for, fewer foreclosures, and more spendable cash to put into the market.

Answer 3

What lower house prices? I haven't found any.