Housing Really Is the Business Cycle: What Survives the Lessons of 2008–09?

The downturn of 2008–09 has confirmed that: (i) housing is the single most critical part of the U.S. business cycle, (ii) the proper conduct of monetary policy needs to be cognizant that choices made at one point in time affect the options later, and (iii) the best time to intervene in the housing cycle is when the volume of building is above normal and growing more so. What was different this time was the rapid and substantial decline in home prices.