All but two of the 11 recessions in the U.S. since 1945 were preceded by a housing slump, showing the industry's significance in the economic cycle, but experts today say that the current slowdown will not lead an overall recession.
Edward Leamer, an economics professor at the University of California, Los Angeles, tells The New York Times, “Housing is not in a position to lead this thing down." Though, how housing may help stall overall recovery is another question. Home price appreciation and sales have slowed as interest rates rise, and builders are less bullish than in years past. Put another way, housing's slowdown may have staying power, but likely will not make things worse.
Even though housing does not account for all that much of the economy, its role in recessions is huge, because it is highly cyclical and sensitive to interest rates. Think of expansions and recessions as the cycle of things that go up and down a lot. Housing is a big determinant of where that cycle is headed because, unlike many other sectors, it has wide swings. The housing sector accounts for as little as 3 percent of economic output during recessions and about twice that during booms. Other pieces of the economy are much bigger, but they don’t change nearly as much from boom to bust.