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New Home Sales and Recessions: The Graph

Courtesy of Calculated Risk:

So far we have dodged the recession bullet. I am not quite sure how. It may be that what we see in 1973-5, 1979-82, and 1990-1 is restrictive inflation-fighting monetary policy raising interest rates and thus curbing spending of all kinds, including spending on new homes. In 2000-1 we didn't see those kinds of interest rate increases--and hence the recession caused by the bursting of the dot.com bubble wasn't associated with a sharp fall in new home sales. Now we have a very sharp fall in new home sales, but will it carry the rest of the economy down with it?

Stay tuned...