November 15, 2011
Morning Edition included a discussion this morning (no link yet) with WSJ economics editor David Wessel and the Economist’s economics editor Zanny Mintos Beddes. When the discussion turned to housing, David Wessel said that in retrospect we underestimated the extent to which housing would be a drag on the economy.
Actually, those who understood the housing market were saying at the beginning of the downturn and before that the collapse of the housing bubble would be a serious and longterm drag on the economy. It was easy to see that the loss of $8 trillion in housing wealth would substantially reduce consumption and that the enormous overbuilding during the boom was going to lead to a prolonged period of depressed construction. Wessel simply failed to study the factors driving the economy. There was no need for hindsight on this one.
At one point Zanny Mintos Beddes held out the possibility that resurgent residential construction might provide a boost to the economy in the near future. That seem unlikely since the vacancy rate is still near record highs.
[I just stumbled onto this one by chance. People who did their homework did not need hindsight.]
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