The recession and US housing prices early in the decade

Figure 1:Median and Average Sales Prices of New Homes Sold in United States. Up, up, and then recently, down.
Click to Enlarge

I came across an interesting statement in Alan Greenspan's book (1st ed., p 225) explaining the reasons for the relative mildness of the 2001 US recession :

"In the United States, homes had increased in value so much that households, feeling flush, seemed more willing to spend"

It is widely acknowledged now (2008) that housing prices were inflated artificially due to the easy credit available in the first half of the decade. For example, Figure 1 shows the average and median US home prices between 1980 and 2007 (source: US census). Notice the very rapid increase in new home prices between 2000 and 2006. And the most recent slowdown.

Greenspan has touched on the fundamental force responsible for the 2001 recession being so mild - the economy's white knight in shining armor was the US consumer with pockets full from the soaring house prices. All those refinancing dollars kept up the consumer spending. The 2000-01 dot com debacle was perhaps larger than it seemed; but the cushioning effect of housing prices made the pain a lot less, back then.

Does this mean that it is payback time now? Did we end up borrowing from the future in 2001? With housing prices plateauing and actually decreasing in some markets, I very much doubt of housing will bail out the economy this time.

Wanted: New knight in shining armor, preferably resilient to speculative forces.

Well I've read that the weak dollar is good for US exports and also makes foreign imports dearer (e.g. $120+ oil). Perhaps these two factors will buttress the US economy this time. Wait and watch.