Housing Prices and Recession...

I keep harping on about the fall in house prices in the US leading to a recession- my last installment was here.

CalculatedRisk have a careful assessment of the argument here, and essentially agree. If you don't have time to read the whole article, this graph illustrates it nicely. Housing values were recently at an all-time high as a percentage of GDP, and so mortgages still are. As house prices start to fall, those mortgages are going to stay at their stratospheric levels, implying that net wealth of households is falling far more dramatically (in percentage terms) than the fall in house prices alone would suggest. And we know the influence of the wealth affect on consumption, and therefore GDP......