Housing Slump Not Recession Culprit

In this piece from Reason Samuel Staley argues that the housing crisis can't be fully blamed for the economic recession.

1 minute read

January 27, 2008, 11:00 AM PST

By Nate Berg


"The housing industry simply can't live up to its reputation as a major driver of the U.S. economy. The housing industry's woes are really a symptom of larger economic problems, not the cause of a recession or downturn.

This observation may seem a bit odd. After all, economists at the National Association of Homebuilders estimate that the economic value produced by the housing industry may represent as much as 15 percent of the national economy. Every new home generates about $80,000 in new wages and 2.4 new jobs in construction and related industries. These are impressive numbers.

So, when the nation's largest mortgage lender, Countrywide, decides to sell out to Bank of America in the wake of record high foreclosure rates, and large homebuilders such as Levitt and Sons and KB Homes are either in bankruptcy or teetering on the edge, the economy has to suffer. Doesn't it?

Yes, but not in ways that would prompt an economic recession."

Tuesday, January 22, 2008 in Reason

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