Federal Reserve V.P. and senior policy advisor John Duca has just published an an exceptionally lucid article that discusses the four key “shocks” suffered by the U.S. economy during the financial crisis: As he states quite succinctly, “Home construction plunged, wealth fell, credit standards tightened and financial markets seized up.”
He discusses the relationship between home construction and GDP, housing’s wealth effect, and the availability of credit; and concludes with a balanced assessment of what may lie ahead for both the U.S. and global economies. He cites indicators that point to recovery, but tempers those with a discussion of the downside risks that remain.
There are enough stats and charts here to satisfy number crunchers like me, but the prose is clear and readable enough to stand on its own.
I think this is material that anyone in real estate, construction or mortgage finance should read, so we have posted it on our “Learn” page.