This study correctly predicted the Great Recession. In 2007 everything in the construction market was looking up. Housing prices where high. Anyone could get a mortgage. In early 2007 New Century Financial quietly filed for bankruptcy with little fan fare. After 6 months the Dow Jones Industrial Average was blasting through all time highs. Then just 12 short months later Lehman Brothers was bankrupt and the U.S. economy was in the midst of a wide, expansive, and long lasting recession. What if I told you this policy was driven by the Federal Funds rate and Housing starts? Also the trend is still continuing today as interest rates have been held artificially low by the Fed. My study shows how raising the Federal Funds Rate will actually speed housing construction, personal income, and household formations. All items that our economy dearly needs to continue this bull market.
This paragraph written by Author Jobe Leonard in January of 2007 is eerily similar to what engulfed the world economies and deflated our markets: "Based on the model and the current level of the Federal Funds Rate can be forecasted that housing starts may continue to slow down for the next four to five year period. This is predicted because of relatively low numbers of new residential construction, and marginal increases in personal income and household formations. Furthermore, current inventories of existing homes, oil prices, and predatory lending practices may continue to pull down the housing market and starts for many periods to come."
This paragraph written by Author Jobe Leonard in January of 2007 is eerily similar to what engulfed the world economies and deflated our markets: "Based on the model and the current level of the Federal Funds Rate can be forecasted that housing starts may continue to slow down for the next four to five year period. This is predicted because of relatively low numbers of new residential construction, and marginal increases in personal income and household formations. Furthermore, current inventories of existing homes, oil prices, and predatory lending practices may continue to pull down the housing market and starts for many periods to come."
