Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government’s “Cash for Clunkers” program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.
The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive. Purchases of home furnishings and appliances also added to economic growth.
The government’s $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.
The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector’s return to good health is a crucial ingredient to a sustained economic recovery.
Re: Cash for Clunkers, consider this Reddit commentary
I work in a small used car dealership. Let me tell you what this program has done to us.
All of the quality vehicles traded in had to be removed from the road and destroyed. What this has done is inflated the value of used cars at auctions. Vehicles at a good bargain have become scarce, and buyers have become even scarcer. Cash for Clunkers is hurting all of us small guys who were not able to partake in this program.
I have no doubt though, we will soon see mass repossessions and values will plummet even lower than where they were, resulting in a net loss in value for us on our investments.