Market weakness.2C 2005.E2.80.932006 United States housing market correction

common indexes used adjustable rate mortgages (1996-2006)

the booming housing market halted abruptly in many parts of united states in late summer of 2005, , of summer 2006, several markets faced issues of ballooning inventories, falling prices, , sharply reduced sales volumes. in august 2006, barron s magazine warned, housing crisis approaches , , noted median price of new homes dropped 3% since january 2006, new-home inventories hit record in april , remained near all-time highs, existing-home inventories 39% higher 1 year earlier, , sales down more 10%, , predicted national median price of housing fall close 30% in next 3 years ... simple reversion mean.

fortune magazine labeled many strong housing markets dead zones ; other areas classified danger zones , safe havens . fortune dispelled 4 myths future of home prices . in boston, year-over-year prices dropped, sales fell, inventory increased, foreclosures up, , correction in massachusetts called hard landing .

the booming housing markets in washington, d.c., san diego, california, phoenix, arizona, , other cities stalled well. arizona regional multiple listing service (armls) showed in summer 2006, for-sale housing inventory in phoenix hads grown on 50,000 homes, of half vacant (see graphic). several home builders revised forecasts sharply downward during summer of 2006, e.g., d.r. horton cut yearly earnings forecast one-third in july 2006, value of luxury home builder toll brothers stock fell 50% between august 2005 , august 2006, , dow jones u.s. home construction index down on 40% of mid-august 2006.

ceo robert toll of toll brothers explained, builders built speculative homes trying move them offering large incentives , discounts; , buyers canceling contracts homes being built . homebuilder kara homes announced on 13 september 2006 2 profitable quarters in history of our company , yet company filed bankruptcy protection less 1 month later on 6 october. 6 months later on 10 april 2007, kara homes sold unfinished developments, causing prospective buyers previous year lose deposits, of whom put down more $100,000.

as housing market began soften winter 2005 through summer 2006, nar chief economist david lereah predicted soft landing market. however, based on unprecedented rises in inventory , sharply slowing market throughout 2006, leslie appleton-young, chief economist of california association of realtors, said not comfortable mild term soft landing describe happening in california s real estate market.

the financial times warned of impact on u.s. economy of hard edge in soft landing scenario, saying slowdown in these red-hot markets inevitable. may gentle, impossible rule out collapse of sentiment , of prices. ... if housing wealth stops rising ... effect on world s economy depressing indeed . difficult characterize position of home builders other in hard landing , said robert i. toll, ceo of toll brothers.

angelo mozilo, ceo of countrywide financial, said ve never seen soft-landing in 53 years, have ways go before levels out. have prepare company worst can happen. following these reports, lereah admitted expects home prices come down 5% nationally , , said cities in florida , california have hard landings.

national home sales , prices both fell dramatically again in march 2007 according nar data, sales down 13% 482,000 peak of 554,000 in march 2006 , national median price falling 6% $217,000 peak of $230,200 in july 2006. plunge in existing-home sales steepest since 1989. new home market suffered. biggest year on year drop in median home prices since 1970 occurred in april 2007. median prices new homes fell 10.9 percent according u.s. department of commerce.

based on slumping sales , prices in august 2006, economist nouriel roubini warned housing sector in free fall , derail rest of economy, causing recession in 2007. joseph stiglitz, winner of nobel prize in economics in 2001, agreed, saying u.s. might enter recession house prices declined. extent economic slowdown, or possible recession, last depended in large part on resiliency of u.s. consumer spending, made approximately 70% of us$13.7 trillion economy. evaporation of wealth effect amid current housing downturn negatively affect consumer confidence , provide further headwind u.s. economy , of rest of world.

the world bank lowered global economic growth rate due housing slowdown in united states, did not believe u.s. housing malaise further spread rest of world. fed chairman benjamin bernanke said in october 2006 there substantial correction going on in housing market , decline of residential housing construction 1 of major drags causing economy slow ; predicted correcting market decrease u.s. economic growth 1 percent in second half of 2006 , remain drag on expansion 2007.

others speculated on negative impact of retirement of baby boom generation , relative cost rent on declining housing market. in many parts of united states, cheaper rent same property purchase it; national median mortgage payment $1,687 per month, twice median rent payment of $868 per month.

condominium price appreciation (percentages) in south , west united states, 2002–2006. (source: nar.)






^ cite error: named reference barron s crisis invoked never defined (see page).
^ article classified several u.s. real-estate regions dead zones , danger zones , , safe havens.

tully, shawn (4 may 2006). welcome dead zone . fortune. welcome dead zone: great housing bubble has started deflate, , fall harder in markets others. 

^ tully, shawn (25 august 2005). getting real real estate bubble: fortune s shawn tully dispels 4 myths future of home prices . fortune. 
^ blanton, kimberly (26 april 2006). housing slowdown deepens in mass.: single-family prices, sales slip in march . boston globe. 
^ blanton, kimberly (11 january 2006). adjustable-rate loans come home roost: squeezed interest rises, home values sag . boston globe. 
^ mass. home foreclosures rise . boston herald. 29 august 2006. archived original on november 10, 2006. 
^ blanton, kimberly (9 december 2005). sellers chop asking prices housing market slows: cuts of 20% common analysts see signs of hard landing . boston globe. 
^ laing, jonathan r. (20 june 2005). bubble s new home . barron s. home-price bubble feels stock-market mania in spring of 1999, before stock bubble burst in 2000, hype, herd investing , absolute confidence in inevitability of continuing price appreciation. blood ran cold @ cocktail party other night when recent yale medical school graduate told me buying condo live in boston during year-long internship, flip profit next year. tulipmania reigns.  plot of inflation-adjusted home price appreciation in several u.s. cities, 1990–2005:


^ paul magnusson; stan crock; peter coy (19 december 2005). bubble, bubble -- trouble: chill in once-red-hot loudoun county, va., portent of s ahead? . businessweek. 
^ can san diego home prices affect coeur d alene pricing? . real estate cda. 28 october 2014. 
^ on 14,000 phoenix for-sale homes vacant . march 10, 2006.  plot of phoenix inventory:


^ alistair barr; john spence (14 july 2006). d.r. horton warning weighs on builders: largest home builder cuts 2006 outlook on difficult housing market . marketwatch. 
^ toll brothers, inc. (nyse:tol) . marketwatch. 
^ dj home construction index . marketwatch. retrieved 18 august 2006. 
^ toll brothers lowers outlook: luxury home builder says buyers still waiting on sidelines . marketwatch. 22 august 2006. 
^ bankruptcy considered: kara homes lays off staff; talk of filing chapter 11 makes local clients anxious . asbury park press. 6 october 2006. 
^ kara homes buyers may lose deposits . asbury park press. 10 april 2007. 
^ fleckenstein, bill (24 april 2006). housing bubble has popped . msnbc.com. reports of falling sales , investors stuck properties can t sell beginning. property owners should worry; should lenders. 
^ peters, jeremy w. (26 july 2006). sales slow homes new , old . new york times. retrieved 26 may 2010. variety of experts say, housing industry appears moving boom starting lot bust 
^ lereah, david (1 january 2006). realtors lereah: housing make soft landing . forbes. 
^ appleton-young, leslie (21 july 2006). housing expert: soft landing off mark . los angeles times. leslie appleton-young @ loss words. chief economist of california assn. of realtors has stopped using term soft landing describe state s real estate market, saying no longer feels comfortable mild label. ... maybe need new. s m prepared say, appleton-young said thursday. ... realtors association last month lowered 2006 sales prediction. when appleton-young first told san diego union-tribune didn t feel comfortable longer using soft landing. m sorry ever made comment, said thursday. ... real estate optimists, phrase soft landing conveyed soothing notion run-up in values on last few years permanent. 
^ hard edge of soft landing housing . financial times. 19 august 2006. 
^ toll, robert (23 august 2006). housing slump proves painful owners , builders: hard landing on coasts jolts must sell; ms. guth tries auction; re preparing worst . wall street journal. 
^ mozilo, angelo (9 august 2006). countrywide financial putting on brakes . wall street journal. 
^ lereah, david (24 august 2006). existing home sales drop 4.1% in july, median prices drop in regions . usa today. 
^ sales of new u.s. homes surged in april . msnbc.com. 2007-05-24. archived original on may 26, 2007. 
^ roubini, nouriel (23 august 2006). recession nasty , deep, economist says . marketwatch. biggest housing slump in last 4 or 5 decades: every housing indicator in free fall, including housing prices. 
^ stiglitz, joseph (8 september 2006). stiglitz says u.s. may have recession house prices decline . bloomberg l.p. 
^ bernanke says `substantial housing downturn slowing growth . bloomberg l.p. 4 october 2006. 
^ fletcher, june (19 july 2006). slowing sales, baby boomers spur glut of mcmansions . wall street journal. golden age of mcmansions may coming end. these oversized homes—characterized sprawling layouts on small lots, , built in cookie-cutter style big developers—fueled of housing boom. rising energy , mortgage costs, shrinking families , growing number of retirement-age baby boomers set on downsizing, there signs of emerging glut. ... boomers in late 50s counting on selling huge houses fund retirement. yet number of factors weighing down demand. rise in home heating , cooling costs, mcmansions increasingly expensive maintain. ... overall slump in housing market crimping big-home sales. ... meantime, jump in interest rates has put cost of big house out of more people s reach. 
^ editorial: fun while lasted . new york times. 5 september 2006. economic signals flashing housing boom over, speculation has turned how deep slump , how long last ... conventional wisdom holds long don t plan sell house time ... can cash in later. or can you? downturn in housing overlapping retirement of baby boom generation, starts officially in 2008 ... of them homeowners, , many of them presumably want sell homes, extracting cash retirement in process. theoretically, implies glut of houses sale, surely mitigate upturn in prices, , drive them ever lower. ... house party over, don t yet know how bad hangover going be. 
^ knox, noelle (10 august 2006). some, renting makes more sense . usa today. retrieved 26 may 2010.