Destin, FL (PressExposure) March 02, 2011 -- The erosion of the syndrome known as the "Wealth Effect" is showing that fall out from the housing slump is having a major impact on the U.S. economy, according to Housing Predictor analysts.
Consumer spending habits slowed for a time after the housing bubble burst as the "Wealth Effect" made people feel like they were losing money as equity in their homes dissipated with falling home values. Three years after the financial crisis consumers have changed their habits, cutting spending on many consumer goods.
A study conducted by Harvard's Joint Center for Housing Studies showed that the real estate bubble would have only been about half its size had banks and mortgage companies not offered the new breed of mortgages, reducing the number of troubled properties in foreclosure substantially.
The foreclosure crisis has resulted in more than 6-million U.S. foreclosures and is gaining momentum as more homeowners lose the ability to pay mortgages, and other upside down mortgage holders walk away from their homes. Historically housing leads the U.S. economy out of recessions, but the economy has sustained a massive blow from the bankers, who developed new mortgages and sold them to anyone that could sign their name.
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