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Briefing

United States: Real Estate

Appears in: North America, Finance and Banking, Macroeconomy, United States, Real Estate, Real Estate and Mortgage Finance, Residential

Critical Issues

Background:

After more than a decade of rising prices in the U.S. housing sector, home prices began declining in Q2 2006 and continued to fall into 2009, though at a slower pace. While over-building during the housing boom led to a glut of housing inventories, by mid-2009 the supply of new housing had undergone a significant downward correction and housing starts appeared to have stabilized. However, inventories remain elevated above their long term average and an increasing number of foreclosures continue to enter the market. On the demand side, government incentives in the form of lower mortgage rates and a $8,000 first time homebuyer tax credit have lent support to demand, but the weak labor market and sluggish income growth will continue to weigh down the indebted U.S. consumer. Without a narrowing of the demand-supply mismatch, there remains a risk of a prolonged decline in home prices.

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Associated Readings

News Calculated Risk Oct 03, 2009 The Impact of the Declining Homeownership Rate Opinions The Economist Aug 20, 2009 America's housing market: Where it all began; Signs of stabilisation should not obscure the big problems still ahead Analysis J.P. Morgan Robert Mellman Jul 31, 2009 The US Housing Market is Finally in a Recovery Phase Opinions New York Times Robert Shiller Jun 07, 2009 Why Home Prices May Keep Falling Analysis Congressional Budget Office Mark Lasky November 2008 Background Paper: The Outlook for Housing Starts, 2009 to 2012 Research University of Wisconsin-Madison and Federal Reserve Morris A. Davis, Robert F. Martin and Andreas Lehnert Dec 2007 The Rent-Price Ratio for the Aggregate Stock of Owner-Occupied Housing Research Yale University Robert J. Shiller Aug 31, 2007 Understanding Recent Trends in House Prices and Home Ownership

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