Researchers say that the recent housing downturn doesn't necessarily mean an end to economic growth.
Evidence keeps piling up that the housing sector, after fueling the American economy with its historic boom, is now in a recession.
Usually, housing downturns precede broader recessions in the whole economy. But this time, forecasters say that, for a range of reasons, the economy may continue on a path of growth.
The decline in home prices and sales volume has ripple effects, to be sure. Wednesday, the Commerce Department reported that the economy grew at a 2.2 percent annual pace in the quarter from July through September, a slower pace than earlier this year. A main reason was the slump in residential construction.
But housing and the rest of the economy may be traveling on divergent tracks. In 2001, the last time the nation was in recession, housing did well as home prices continued to climb. Now, the reverse appears to be occurring.
"Typically in the past when housing fell into a recession so did the economy," says Ed Yardeni, chief economist at Oak Associates, an investment firm in Akron, Ohio. This time, "the rest of the economy is growing quite well.... There seems to be a certain amount of resilience."
Weathering the housing slump won't necessarily be easy.
This week, the median sales price of previously owned homes took its biggest tumble ever, falling 3.5 percent in October from the level one year ago to $221,000, according to the National Association of Realtors.
The housing slump hurts the economy in several ways.
There's lower construction spending, falling purchases of appliances, paint, and other home-related goods, and a negative "wealth effect" that affects consumer spending. As home prices dip, homeowners have less equity in their homes, or less money to spend.
Of the 13 occasions when residential construction turned negative on a year-over-year basis, recessions followed 10 times, according to research by the investment firm Merrill Lynch in New York.