Housing Collapse Matches Great Depression Years

Housing Collapse Matches Great Depression Years
January 19, 2012

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

The collapse in housing prices in the United States has virtually matched that of the first few years of the Great Depression, according to the Zillow Home Value Index.

The national average has plunged 26 percent. From 1928 to 1933, housing values fell 25.9 percent, Zillow reports.

In January, Zillow reported housing values nationally had fallen for 53 consecutive months through November and fell 5.1 percent year-over-year.

As Zillow was coming out with these figures, 1,200 pages of previously unreleased transcripts from closed-door Federal Reserve Open Market Committee meetings in 2006 show Fed Chairman Ben Bernanke and other officials were clueless about the imminent housing collapse and financial crisis.

“So far we are seeing, at worst, an orderly decline in the housing market,” Bernanke said in response to a Fed governor who expressed concerns about the mortgage market.

Bernanke was not alone in failing to see the coming crisis.

Current U.S. Treasury secretary Timothy Geithner was president of the Federal Reserve Bank of New York in 2006. The transcripts show him saying then, "We believe that, absent some large, negative shock to perceptions about employment and earned income, the effects of the expected cooling in housing prices are going to be modest.”

Housing prices peaked in June 2006. By the end of 2007 they had fallen enough to spark a credit crisis that panicked the Bush administration, which responded with the Troubled Asset Relief Program and other rescues, many of which were widely opposed by the public.

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)