Gene Epstein: Housing isn't killing the economy (2007)

What doesn't kill the economy, to borrow a phrase from Nietzsche, only seems to make it stronger. You'd think that, if the bust in residential housing didn't fatally wound the economy, it would make it much weaker.

But so far, the standard measure of gross domestic product shows just the opposite. Ever since the housing bust began, GDP growth, excluding residential investment, has accelerated.

How could this be? The answer is probably that, if housing hadn't gone bust, the rest of the economy would have expanded even faster. But the fact that we even need this counter-factual to find collateral damage is not only testimony to the economy's astonishing resilience. It also suggests that, if the housing sector worsens even further -- which now seems likely -- the economy will nonetheless muddle through.

~ Gene Epstein, Barron's "Economic Beat" editor, "Housing Isn't Clobbering GDP," October 22, 2007