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Is inflation or the housing market the biggest problem in the economy?

Hi, I writing an essay for my econ class and this is one of the questions I have to answer. In my opinion the housing market is the biggest problem right now. I believe that inflation is something we have to worry about in the future, but right now the biggest problem in my opinion is the housing market. What do you guys and gals think? I'm I right or wrong? Any help would be greatly appreciated. Thanks, GhostWhispererFan25

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1. Honestly, I don't think either are truly a problem. Inflation certainly isn't -- it's exceptionally low. As for the housing market, I think the pundits are working themselves into a lather over nothing. The economy as a whole is still extremely healthy -- close to 5% growth. While that will go down to about 3% next year, that's not necessarily a bad thing: 5% is simply unsustainable, whereas 3% is just about right. The housing "crunch" really affects very few people: those with very bad mortgage deals and people who have a home equity line of credit that is now greater than the value of their house (although at the end of the day that's the bank's problem). Additionally, as housing prices continue to fall, that will encourage more people to buy instead of rent -- prices will return to equilibrium sooner rather than later (12-24 months). For people like me who are looking to buy their first house, the housing market looks OUTSTANDING and is encouraing me to buy. Additionally, the cheap dollar right now has an expansionary effect on our economy because it encourages US exports. Not to mention that we're now in the holiday season, which means that tons of cash is going to get pumped into the economy. An additional rate cut from the Fed (likely 1/4 point) will likewise stimulate the economy. I don't think either of those are the "biggest" problems in the economy. If anything is the biggest problem, it MIGHT be the price of oil -- but that price is artificially high right now because of rampant speculation, not because of an actual supply problem. Just this week we've seen price of oil drop close to 12% -- investors are going to start recovering their profits and the price will probably stabilize to somewhere around $80, which is well below historical highs. Hope that helps! Keep in mind that most economists are notoriously pessimistic, so don't be afraid to tell your prof that things aren't as bad as the doom-and-gloom experts say.
2. I think that yes, it is one of the biggest problems in the economy. If the housing market were isolated in a bubble, by itself, it wouldn't have as much impact... but the fact that the housing market drives so many other sectors of our economy (giant lending industry, wall street, all jobs associated with real estate, lending, and construction, individual wealth, & individual/ consumer spending) it is a huge issue. Its kind of like pulling the bottom block from the Jenga puzzle. Yeah.. its just one block, but everything else is resting upon it! I think the second biggest problem in the economy is the media. People believe what is shoved under there noses day in and day out via TV, newspaper, radio, internet, etc. It is just adding fuel to the fire. Confidence is the number one marker of how low we are going to go into this economic disaster. If the public can start to feel comfortable, it will turn around. As long as they maintain a skeptical, "wait and see" attitude... we are going to continue into this abyss of economic hardship! In many ways its more sociological than economical. Good luck with your essay and hope this helps.