Sunday, February 26, 2012
Measuring Housing's Drag on the Economy
This article aims to assess how much of the recent financial crisis can be blamed on the housing market. Housing had a major part in causing the recession and it is also slowing the recovery. The article comes to the conclusion that over half of the reason the recovery has been so slow is housing. Due to the housing crisis, it was impossible to get interest rates low enough that enough people would want to borrow to buy a house (due to the Fisher equation we learned in class). It also points out that the states that were hit the hardest by the housing bubble are the ones that are having the hardest time recovering. Overall, the article comes to the conclusion that a great deal of blame can be put on housing for the recent recession and slow recovery.
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1 comment:
I think when the housing bubble was created, it allowed people to get a bigger house when they did not deserve one. The value of their properties also increased giving them false hope that their wealth has increased which encouraged them to increase their consumption. And when the bubble burst, which in technical terms can be termed as correction of the market, these people realized their properties had lost in value dramatically.
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