Assuming the US economy is either in a recession, or on the precipice, it will be the first time in history that housing pulled the economy into a recession. Typically a recession drags housing down kicking and screaming with it.
Who cares? (I find it easier to talk to myself)
It help explains why the federal government has been so tardy in reacting to the impact of housing on the economy. Once the Fed began to raise the federal funds rate in 2004 after keeping rates unusually low for 3 years, actions (and acknowledgements) were taken only after last summer’s credit market implosion. It makes me even more wary of comfort messages like this.
The unusually low rates and unprecedented liquidity in the credit markets fueled the housing boom of 2003-2006 across the US (and much of the world). This created a high level of speculation resulting in unusually high sales levels. The differential between normal sales levels and those of this period were represented by investment properties.
The music stopped in July 2007.
Investor demand, flippers, etc. fueled artificial housing demand layering over an above a brisk housing market caused by low rates and non-existent underwriting standards left a high level of unsold inventory and foreclosures behind.
The combination of rental and sales market trends we see now are unusual.
Sales activity slowing
Sales inventory levels rising
Sales prices sliding
Foreclosure activity rising
Rental inventory levels rising
Rental prices slipping
We now have a situation where both sales and rentals are in sync: characterized by price erosion and inventory expansion.
Perhaps we needed a jackass pulling the cart, rather than a horse?