Real Estate Slump Could Spur Recession

What does it mean for greens?

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By Brian Clark Howard

As home prices continue their downward spiral across most of the country, economists are increasingly concerned that other sectors will follow in the wake, Time magazine reported in September. The American real estate market is hurting after the past few years of over inflated prices and overly loose lending practices.

Nationally, house prices dropped 3.2% in the 12 months ending in June, while the economy grew 1.9%. Now, observers fear the housing troubles may be spreading. This month, the Labor Department reported that job creation has snapped into reverse, after several years of growth. Analysts are reacting with fear and pessimism that the country may be headed for a recession, a prolonged period of economic downturn in which many lose their jobs.

The jury is still out on that one, however, as some experts have also pointed out that it is too early to predict such a large-scale phenomenon, and that readjusting of mortgage lending practices may make or break it. In the past, upticks in housing markets have lifted the economy out of recession, and beyond. Today, we are seeing many unsold units, leading to cutbacks in construction, and therefore job loss.

So what does all this mean for greens? On one hand, there is opportunity to preserve more open space and curb sprawl, as pressure is reduced on the need for more development. That end result may be higher environmental quality, as well as quality of life, down the road. Perhaps that will in turn lead to many homeowners being able to secure better value for their homes. The built environment is the nation's biggest contributor to greenhouse gases, so the less we build, the less energy we have to consume, meaning cleaner air and reduced contribution to global warming. That could in turn result in fewer sick days and deaths, reduced severe weather events and fewer natural disasters — all trends that can bolster an economy.

An economic downturn may provide incentive for homeowners and communities to go green in order to stand out above the crowd, a possible boon. It may spur creative thinking in terms of new urbanism and job growth in emerging technologies, not to mention a push for energy efficiency. Instead of wanton speculation, people may invest more in core businesses that create real value, instead of unnecessary and wasteful endeavors.

On the other hand, it's also possible that a tightening of the nation's belts may lead to more waste and pollution, as consumers reduce spending on organics and other green products, in an effort to save pennies in the short term. Only time will tell. For more on this story, click here.

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