Fred Harteis Editors Note: This is a good article if you are looking for information on what could possibly happen if the housing market levels off and the effect in could have on our economy. Anyone with an interest in the housing market or the economy might benefit from this article.
Whether it's a national bubble or just pockets of regional froth, an end to surge in home prices could inflict economic harm that would make the 2000 tech bust look tame in comparison.
Even if the market cools in only those parts of the country that Federal Reserve Chairman Alan Greenspan describes as "frothy," the
If prices were merely to level off, it could subdue the property-linked activity that has stimulated spending and job growth -- crucial supports for the
Based on benchmarks from a recent International Monetary Fund study comparing the stock and housing market bubbles, there are about 15 states that are vulnerable to a housing market correction. These represent about 35 percent of gross domestic product, the broadest measure of the nation's economy.
"A significant correction in consumption spending in these states is bound to have significant effects on national growth," said Thomas Helbling, an economist at the IMF in
Merrill Lynch estimates the impact on growth could be as much as one percentage point of gross domestic product.
Add the knock-on effects to the rest of the economy to any initial spending hit and the situation looks worse.
The IMF study found that while stock market collapses are more frequent, housing busts do a lot more damage.
About : Fred Harteis provides Team Business Series as a service to small business owners. Fred Harteis is president or I Team.