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May 2011
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Housing is the business cycle

Housing's double dip does not bode well for the already anemic economic recovery.  People often play down the importance of housing sector and cited housing sector was just 7% of the national economy. 

But according Ed. Leamer, a prominent economics professor at UCLA and an expert on business cycle,  "Anyone playing down the importance of housing at this point in the business cycle is missing the point: Housing is the business cycle."

According to WSJ, the Commerce Department on Tuesday is expected to report new-home sales were roughly flat in April, at a seasonally adjusted annual pace of 300,000. That is woeful by historical standards. Unless sales pick up materially this year, 2011 will mark a sixth year in a row of new-home-sales declines and the fewest sales since records began being kept in 1963. One statistic tells the story: The 323,000 new homes sold in 2010 was less than 60% of the number of new homes sold in 1963, even though the population today is nearly two-thirds bigger.

[AOT]

We are stuck today, as in the 1930s, in a household recession triggered by excessive debt levels. These, unfortunately, can take many years—not months—to fix.


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