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Conor Sen

Pandemic Housing Shifts Will Speed Recovery in 2021

A slumping home market dragged out a rebound from the 2008 recession; this time the industry will help, not hinder, the economy.

A shortage of houses for sale is driving up prices.

A shortage of houses for sale is driving up prices.

Photographer: Bloomberg

The impact of the housing market on the 2008 financial crisis couldn't have been more different than what we've seen during this year's recession. While housing acted as a strong headwind slowing the economic recovery 12 years ago, not it's looking like a tailwind that will help lift the economy as we move past the pandemic in 2021.

The damage wrought to the sector after 2008 was multipronged and long-lasting. The glut of foreclosures and inventory overhang meant that very little new construction was needed for years. There was consequently minimal growth in construction employment -- a key driver of the business cycle -- coming out of 2008 until the latter part of 2012. That was one reason why the early years of the recovery felt like we were still stuck in a recession.