Most recent recessions are gauged against the biggest economic downturn of them all, the 1930s Great Depression. Of course, when we looked at the current recession, the decline in the housing market is one of the key factors. How does the current situation in the housing market match up against what happened in the 1930s? N.C. State University economist Mike Walden weighs in.
“Well , we had housing crash also in the 1930s. From the peak to the trough for the bottom, housing prices fell 30 percent. Unfortunately, today we’ve exceeded that. In the current housing recession we have now seen a peak-to-bottom — and we don’t know really if it’s the true bottom, but at least a peak to today — level drop in the average house price of 35 percent.
“So, the problems in the housing market in the U.S. that we currently experience now exceed the problems that we saw in the 1930s. And I think this is, this is a big reason why we’re still having problems in getting traction in the economy. The housing market usually is one of those sectors that helps lead us out of recessions. As people buy homes as their confidence goes up. We’re not seeing that yet.
“So I think a good rule of thumb to follow in coming months and years is to watch the housing market. As the housing market goes in the U.S., I think so, too, will go the broader economy.”Category: Economic Perspective