The Double Whammy of Recession and a Bad Housing Market

The Double Whammy of Recession and a Bad Housing Market



The economy apparently doesn’t realize this is a season of giving. The latest data present us with two major Grinches. 1) the 0.5% GDP decline in the third quarter has been confirmed and some expect as much as a 6.0% GDP decline in the fourth quarter. 2) Median home prices have suffered the worst decline since the Great Depression as existing home sales dropped 8.6% last month.

What worries me about the duel problems of a recession and a collapsing housing market is that our recovery will be hampered by our workforce’s immobility. If people are stuck in homes they can’t afford to sell, they can’t follow the jobs. And if new industries can’t attract the right labor, they won’t grow as quickly or may not succeed at all.

This worry is overly negative to be sure, but I do believe that a dynamic, mobile workforce is the key to our success in the global marketplace. When we as a culture started treating one of our most essential commodities (the abundance of quality, reasonably priced housing) as a get-rich-quick investment, we did more than wreck the banking industry. We wounded one of the great advantages of American existence: the ability to get up and go where the money is.

We will recover, but the combination of a recession and a poor housing market will make turning the economy around all the more difficult.

  • Mark

    Well, hey, at least we have the prospect of all sorts of immigrants looking to come here who might be able to both pump up the housing market and solve some of the problems of labor mobility. Oh, wait, we’ve done everything possible to discourage more immigration, so that’s out of the question. We…are…so…screwed.

  • George Mauer

    Hey Alan,
    You frequently talk about economy matters – and not saying that you shouldn’t or that your opinions are bad – but I’m just wondering, what are your qualifications? Are you involved with analyzing the economy professionally or academically? Are you just an ardent follower of economic news?

    You usually have insightful things to say and I’m just curious about the source.

  • Arthur

    But what about all the people who have lost their homes to foreclosure? Surely they have nothing keeping them from moving to find the jobs.