This was an email sent to me by a reader who read this in the WSJ:
Whether or not the housing market can stand on its own will provide a valuable insight into the broader recovery’s ability to keep going when the Obama administration’s stimulus package peters out around the end of the year.
“That’s the nagging question right now,” says Yale University economist Robert Shiller. “How much of the strenght in the housing market is just the perception of government support?” he said. “I do have concern about a double dip.”
To some extent, a weak housing market can actually be a sign of health. The U.S. economy needs to reduce permanently its dependence on credit-fueled construction, and move more toward selling goods and services to booming emerging markets. At the peak of the housing boom, construction and other housing-related services accounted for about 6.3% of the U.S. economy. Now they account for only 2.5%. The right level is probably somewhere in the middle.