THE PRODUCTION OF NEW HOUSING is a credit-intensive process in the United States and in other industrial countries. The homebuilding industry is a relatively heavy user of credit in its production process, and housing units, from which the services flow, are normally purchased with long-term credits—appropriately enough, since they are among the longest-lived assets in the economy. This practice and the institutional framework of housing finance in the United States have made the industry vulnerable to variations in credit market conditions, particularly during periods of intense monetary restraint. Although substantial federal efforts have been undertaken to offset this vulnerability, the experiences of housing in 1966, 1969-70, and 1973, when homebuilding declined dramatically, amply demonstrate it.
