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Housing Slide in U.S. Threatens to Drag Economy Into Recession

• John Gittelsohn via Bob Willis

Housing led the U.S. out of seven of the last eight recessions. This time, it may kill the recovery.

Home sales collapsed after a federal tax credit for buyers expired in April. Since then, the manufacturing-led expansion, which began in the second half of 2009, has been waning, with jobless claims rising and factory orders falling.

“If foreclosures continue to mount and depress home prices, that could send the economy back into a recession,” said Celia Chen, an economist who tracks the industry for Moody’s Analytics Inc. “The housing market and the broader economy are closely intertwined.”

Spending on home construction and items such as furniture and stoves accounted for about 15 percent of gross domestic product in the second quarter, according to West Chester, Pennsylvania-based Moody’s Analytics. Real estate also can influence consumer spending indirectly. When values soared in the mid-2000s, people used the boost in equity to pay for cars and vacations. After prices fell, homeowners lost that cushion and curbed spending.


1 Comments in Response to

Comment by Robert Dunn
Entered on:

As if we ever left the recession/depression that we're in now. I thought Bloomberg was more to the point rather than painting a quasi cover over the state of economic affairs. All indicators reflect that we are in the beginning stages (if not already in) a depression, which BTW is going to get a whole lot worse. Lets just call it what it really is. Of course the majority of sheeple buy the rosy propoganda of the lamestream media.

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