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My Two Cents

The Worst Housing Recession Since the Great Depression? Not Yet

Chris Farrell Nov 21, 2007

Economist Ed Yardeni asks, “Is this the worst housing recession since the Great Depression?” His answer? “Not so far.”

But he’s hardly optimistic. The bad news keeps on coming. Yardeni and a colleague looked at the data on housing starts from 1959 through October of this year. Here are their results:

(1) Since 1959, there have been 10 housing recessions with P/T declines exceeding 10%. The range of the downturns has been minus 13.0% to minus 64.7%.

(2) So far, housing starts are down 46.4% during the current recession from 2.29 million units during January 2006 to 1.23 mu during October of this year.

(3) So far, there have been four housing recessions more severe than the current one.

(4) Four recessions troughed with starts falling under 1.0 mu. The current one is likely to do the same, probably matching the worst level on record (since 1959), i.e., 798,000 units during January 1991.

(5) If it does that, housing starts would be down 65.2% P/T, which would surpass all of the previous housing recessions.

So, this housing recession could turn out to be the worst on record. The subprime mortgage slime has oozed into every corner and under every door of the mortgage market. The latest casualty is Freddie Mac.

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