Overinvestment in durable consumers’ goods like houses IS an overinvestment in a higher order of production. A new house is a lower order producers’ good for the unit services it is expected to provide in the near future and a higher order producers’ good for the unit services it is expected to supply in the distant future.
An investment boom is characterized by higher investment than there WOULD HAVE BEEN without the artificially low interest rates, not necessarily higher than the period before. In brief, we SHOULD have had a MORE steep and painful liquidation of malinvestments than we did, but that was precluded by Bernanke’s credit expansion.