White House cuts economic growth forecast (1 Viewer)

[danarhea]

Council of Economic Advisers says GDP to slow for remainder of year and in 2007, blaming weakness on housing.

I have seen this coming for a couple of years, and am surprised it took this long for the bubble to burst. The fact that it took this long before the housing correction to kick in makes the problem worse, due to the larger size of that bubble. Although this has the potential to trigger a major recession, if handled properly, the housing market can be forced to do a soft landing, and the impact wont be that great.

Now before anyone starts blaming Bush, I have to say that this is no more his fault than the bursting of the dot com bubble was Clinton's fault. These are situations where the markets get out of whack and then corrections kick in. There is also a lot of psychology involved. In this case, it was people jumping on the housing bandwagon to the extent that the sector's value became grossly inflated. For those who euphorically rode that bandwagon, it is now time for the inevitable hangover.

Article is here.

 

[jujuman13]

Shock horror, WOW an economic downturn.
Quick, must go and dust off my 1930s gear and get ready to jump them trains agin!

 

[Stinger]

Shock horror, WOW an economic downturn.
Quick, must go and dust off my 1930s gear and get ready to jump them trains agin!

It's due to housing and housing needs to slowdown and in fact prices need to fall. Get the speculation out of it. Housing cost are way out of line and the market needs a chance to readjust them. All other sectors are doing fine.

 

[danarhea]

It's due to housing and housing needs to slowdown and in fact prices need to fall. Get the speculation out of it. Housing cost are way out of line and the market needs a chance to readjust them. All other sectors are doing fine.

They are at this time, and will be, as long as the housing market can be forced into a soft landing. However, if the landing is hard, it will take down the other sectors, which is why the situation must be handled somewhat gingerly. Its like a house of cards, with the housing card on the bottom. Thats the one card you don't want to knock down. And you are right about the speculative aspect of housing. Too many investors in the housing market are just like too many cooks making the soup.