Housing prices in the U.S. rose sharply from the early to mid-2000s, followed by a sharp drop after 2007. This period of accelerated price increases is often called the “housing bubble” and its decline is known as the “housing bubble burst.”
Concurrent with this housing bubble bursting was a serious economic downturn. According to the National Bureau of Economic Research (NBER), the U.S. economy entered a recession in December 2007, from which it started to recover in June 2009. The period of contraction, popularly known as “the Great Recession,” was particularly serious because, for example, the monthly unemployment rate (seasonally adjusted) peaked at 10.0 percent in October 2009—a rate either reached or surpassed only one other time since the unemployment data series started in 1948. That recession ended a quarter of a century earlier, in November 1982.
It is reasonable to argue that the housing bubble and its bursting contributed to the onset, and exacerbated the consequences, of the Great Recession. For example, consumers purchasing near the peak of the bubble presumably faced larger mortgage payments than longer time homeowners, leading them to cut back on expenditures they might have made for other goods and services. Then, once the recession started, and home prices fell, some owners—especially new ones—presumably at minimum felt less wealthy, and therefore more constrained in spending, while others—especially those who lost their jobs because of recessionary pressures—found themselves unable to afford their homes any longer.
Given these events, details of this period deserve a closer look. For example, the housing bubble and burst is usually discussed as a national phenomenon. Yet, according to the familiar saying in real estate, “three factors matter: location, location, and location.” Therefore, did the housing bubble manifest itself differently in different parts of the country? Did the bubble affect renters as well as homeowners? And, given the importance of basic housing in the typical family’s budget—ranging from about 24 percent to 27 percent of total expenditures for the average consumer unit between 1995 and 2015—how did expenditures for other goods and services change during this period?
This Beyond the Numbers article examines the lead up to, and aftermath of, the housing bubble and burst, including changes in housing prices, housing tenure (homeownership and rental rates), and consumer spending. For these purposes, this analysis uses mainly data from the Bureau of Labor Statistics (BLS) Consumer Expenditure (CE) surveys and some data from the Census Bureau. Based on evidence from these data, the “pre-bubble” period is defined as 1995 to 2001; the “bubble” period is defined as 2002 to 2007; and the “burst” and its aftermath cover 2008 through 2015, coincident with the Great Recession (essentially 2008 to 2009) and the first years of recovery therefrom (2010 through 2015).
by Geoffrey Paulin, The Big Picture | Read more:
Image: USBLS
Concurrent with this housing bubble bursting was a serious economic downturn. According to the National Bureau of Economic Research (NBER), the U.S. economy entered a recession in December 2007, from which it started to recover in June 2009. The period of contraction, popularly known as “the Great Recession,” was particularly serious because, for example, the monthly unemployment rate (seasonally adjusted) peaked at 10.0 percent in October 2009—a rate either reached or surpassed only one other time since the unemployment data series started in 1948. That recession ended a quarter of a century earlier, in November 1982.It is reasonable to argue that the housing bubble and its bursting contributed to the onset, and exacerbated the consequences, of the Great Recession. For example, consumers purchasing near the peak of the bubble presumably faced larger mortgage payments than longer time homeowners, leading them to cut back on expenditures they might have made for other goods and services. Then, once the recession started, and home prices fell, some owners—especially new ones—presumably at minimum felt less wealthy, and therefore more constrained in spending, while others—especially those who lost their jobs because of recessionary pressures—found themselves unable to afford their homes any longer.
Given these events, details of this period deserve a closer look. For example, the housing bubble and burst is usually discussed as a national phenomenon. Yet, according to the familiar saying in real estate, “three factors matter: location, location, and location.” Therefore, did the housing bubble manifest itself differently in different parts of the country? Did the bubble affect renters as well as homeowners? And, given the importance of basic housing in the typical family’s budget—ranging from about 24 percent to 27 percent of total expenditures for the average consumer unit between 1995 and 2015—how did expenditures for other goods and services change during this period?
This Beyond the Numbers article examines the lead up to, and aftermath of, the housing bubble and burst, including changes in housing prices, housing tenure (homeownership and rental rates), and consumer spending. For these purposes, this analysis uses mainly data from the Bureau of Labor Statistics (BLS) Consumer Expenditure (CE) surveys and some data from the Census Bureau. Based on evidence from these data, the “pre-bubble” period is defined as 1995 to 2001; the “bubble” period is defined as 2002 to 2007; and the “burst” and its aftermath cover 2008 through 2015, coincident with the Great Recession (essentially 2008 to 2009) and the first years of recovery therefrom (2010 through 2015).
by Geoffrey Paulin, The Big Picture | Read more:
Image: USBLS
