The Commerce Department finally has those much-talked-about Christmas spending numbers. Consumers spend 0.4 percent less than a year ago, the worst consumer showing since June 2007, and that's accelerating fears of recession. We're not there yet, but many pundits believe we're about to be.

Consumer spending accounts for approximately 71 percent of the gross national product. If the consumer doesn't spend, the country is headed for recession.

The question is: why are we surprised? Jobs are contracting; unemployment is up half a percent over a quarter ago. Housing is in a holding pattern with the first loss in home prices in decades, and gas prices at the pump have risen 10 cents a gallon in the last two weeks.

Energy prices have finally impacted wholesale prices by a whopping 6.3 percent over 2007 -- the biggest gain in 26 years. And it's safe to say that consumers are already feeling it.

Tighter credit hasn't helped. Consumers are no longer able to turn their homes into ATMs unless they have lots of equity and good credit.

What the impact will be for spring on the housing market is anyone's guess.

During the last mild recession following the technology stock meltdown and the horrors of 9/11, consumers surprised the economy by cocooning. They made buying a home a statement about needing to feel secure. If nothing else is secure, they want to be secure at home. Those homebuyers kicked off a six-year record-breaking run in housing.

However, unlike the previous recession, inflation is a greater threat this time. Mortgage interest rates aren't as likely to be as obliging as they were in 2002 when new record lows were reached. We're already close to those record lows now. Inflation risks are likely to cause the mortgage bond market to react, and mortgage interest rates will rise. Not by much, but they will rise.

That means homebuyers will need more convincing, particularly that they'll be financially safer in a different home. And that won't be easy to do in a rising interest rate environment. So, home sellers will have to step up to the plate with better prices, more improvements and other incentives.

The other possibility is that people could stay put, afraid to make the wrong move. That also could impact housing negatively.

Either way, housing is likely to be pivotal in determining whether the economy recedes or moves forward.

Published: January 16, 2008

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.