Tuesday, April 13, 2010

Consumer Spending

CNBC has an interesting article on consumer spending and its relationship with mortgage defaults:

Lender Processings Services has released a report stating, "The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans."  This number is also still increasing.  CNBC speculates that this money is being spent--just no longer on mortgages. 

The article quotes another website which showed how one family is spending their mortgage payment at "a tanning salon, nail spa, liquor stores, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc."

Anecdotally, I see this whenever I go shopping (rarely) or out to eat (more frequently).  People are still spending a great deal of money.  I often marvel when I go to a mall at how full it is.  I wonder, "And this is a recession..."  This makes sense though, if people are no longer paying on their mortgage--they are instead paying for entertainment, fashion, and luxury.

This is an interesting phenomenon, and if this is widespread, has serious consequences for our nation's financial future. 

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