One of the bigger potential side effects of flat or declining home prices is how they impact spending. When home owners see double-digit appreciation in their neighborhoods, conventional wisdom says they get spendy. And not just with home equity loans to redo the kitchen or buy a new car but an uptick in overall discretionary spending, such as dinners out. Lackluster appreciation translates to feeling less wealthy and fewer spicy tuna rolls for lunch. (Interestingly and happily, a Salt Lake Tribune story I read on the topic says the downside of the "wealth effect" does not tend to impact charitable giving.)

Now that big home price appreciation has become a rarity, are you pinching pennies more than you did in the boom years of 2004 and 2005?

Here's the Salt Lake Tribune story:

Economists have long marveled at how rising home prices and a vibrant stock market can make people feel really good about their financial situations -- so good in fact, that they spend more freely.

It's called the "wealth effect" -- and even people who haven't actually realized a gain by selling their homes or stocks at a profit can feel it. Although this feeling can make them happy during good times, the wealth effect also can create despair in times such as these, when those paper gains evaporate and real losses loom.

Just ask Laura Polacheck of Salt Lake City.

Polacheck bought her home in April 2006 at the height of a red-hot real estate market. Prices in the area where she bought had been rising by double digits for years, giving many homeowners gains -- on paper anyway -- of $100,000 and beyond.

Polacheck got married and bought a house with her new husband, winding up with a house she no longer needed. She put the property on the market in June, when the latest boom began to sour, and it has yet to sell.

So she has joined the ranks of others for whom the downturn in real estate has been real.

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