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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Lizzie Tudor who wrote (86930)8/24/2007 12:38:31 PM
From: GraceZRead Replies (2) of 306849
 
RE corrections are always of the rolling variety.

I don't think there is a causal relationship between house prices and recession either. Basically the economy and house prices are effected by some of the same inputs so the relationship is coincidental. Rising real interest rates can put the kabosh on both RE and the rest of the economy. We still don't have high real rates but we now have a situation where affordability issues due to underwriting standards getting tightened are going to kick out a huge number of potential buyers. RE will be and is getting affected by this regardless that some markets are still rising on fundamental strength (rising incomes, increases in population, etc.)

That said, it's a ridiculous notion that falling RE prices will cause a recession. We had almost a ten year period of flat RE prices (inflation adjusted) in most of the country in the 1990s during which time the economy grew by a third in real terms.
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