2000s United States housing market correction

United States housing prices experienced a major market correction after the housing bubble that peaked in early 2006. Prices of real estate then adjusted downwards in late 2006, causing a loss of market liquidity and subprime defaults.^[1]

A real estate bubble is a type of economic bubble that occurs periodically in local, regional, national or global real estate markets. A housing bubble is characterized by rapid and sustained increases in the price of real property, such as housing' usually due to some combination of over-confidence and emotion, fraud,^[2] the synthetic^[3] offloading of risk using mortgage-backed securities, the ability to repackage conforming debt ^[4] via government-sponsored enterprises, public and central bank policy^[5] availability of credit, and speculation. Housing bubbles tend to distort valuations upward relative to historic, sustainable, and statistical norms as described by economists Karl Case and Robert Shiller in their book, Irrational Exuberance.^[6] As early as 2003 Shiller questioned whether or not there was, "a bubble in the housing market"^[7] that might in the near future correct.

Timeline

Main article: Timeline of the United States housing bubble

 

Cost of housing by State

Market correction predictions

Percentage change of the Case-Shiller Home Price Index for the housing correction beginning in 2006 (red) and the correction (blue) beginning in 1989, comparing monthly CSI values from the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.

Based on the historic trends in valuations of U.S. housing,^[8][9] many economists and business writers predicted a market correction, ranging from a few percentage points, to 50% or more from peak values in some markets,^{[10][11][12][13][14]} and, although this cooling did not affect all areas of the United States, some warned that the correction could and would be "nasty" and "severe".^[15][16]

Chief economist Mark Zandi of the research firm Moody's Economy.com predicted a crash of double-digit depreciation in some U.S. cities by 2007–2009.^[17][18]Dean Baker of the Center for Economic and Policy Research was the first economist to identify the housing bubble, in a report in the summer of 2002.^[19] Investor Peter Schiff acquired fame in a series of TV appearances where he opposed a multitude of financial experts and claimed that a bust was to come.^[20][21]

The housing bubble was partly subsidized by government-sponsored entities like Fannie Mae and Freddie Mac and federal policies intended to make housing affordable for all.^[22]

Market weakness, 2005–06

National Association of Realtors (NAR) chief economist David Lereah's Explanation of "What Happened" from the 2006 NAR Leadership Conference^[23] Boom ended August 2005 Mortgage rates rose almost one point Affordability conditions deteriorated Speculative investors pulled out Homebuyer confidence plunged Resort buyers went to sidelines Trade-up buyers to sidelines First-time buyers priced out of market

 

Common indexes used for Adjustable Rate Mortgages (1996–2006)

The booming housing market halted abruptly in many parts of the United States in the late summer of 2005, and as of summer 2006, several markets faced ballooning inventories, falling prices, and sharply reduced sales volumes. In August 2006, Barron's magazine warned, "a housing crisis approaches", and noted that the median price of new homes had dropped almost 3% since January 2006, that new-home inventories hit a record in April and remained near all-time highs, that existing-home inventories were 39% higher than they were just one year earlier, and that sales were down more than 10%, and predicted that "the national median price of housing will probably fall by close to 30% in the next three years ... simple reversion to the mean."^[13]

In Boston, year-over-year prices dropped,^[24] sales fell, inventory increased, foreclosures were up,^[25][26] and the correction in Massachusetts was called a "hard landing" in 2005.^[27] The previously booming^[28] housing markets in Washington, D.C., San Diego, California, Phoenix, Arizona, and other cities stalled as well in 2005.^[29][30]

Fortune magazine in May 2006 labeled many previously strong housing markets as "Dead Zones";^[31] other areas were classified as "Danger Zones" and "Safe Havens". Fortune in August 2005 also dispelled "four myths about the future of home prices".^[32]

The Arizona Regional Multiple Listing Service (ARMLS) showed that in summer 2006, the for-sale housing inventory in Phoenix had grown to over 50,000 homes, of which nearly half were vacant (see graphic).^[33] Several home builders revised their forecasts sharply downward during the summer of 2006, e.g., D.R. Horton cut its yearly earnings forecast by one-third in July 2006,^[34] the value of luxury home builder Toll Brothers' stock fell 50% between August 2005 and August 2006,^{[original research?][35]} and the Dow Jones U.S. Home Construction Index was down over 40% as of mid-August 2006.^{[original research?][36]}

CEO Robert Toll of Toll Brothers explained, "builders that built speculative homes are trying to move them by offering large incentives and discounts; and some buyers are canceling contracts for homes already being built".^[37] Homebuilder Kara Homes announced on 13 September 2006 the "two most profitable quarters in the history of our company", yet the company filed for bankruptcy protection less than one month later on 6 October.^[38] Six months later on 10 April 2007, Kara Homes sold unfinished developments, causing prospective buyers from the previous year to lose deposits, some of whom put down more than $100,000 (~$127,774 in 2021).^[39]

As the housing market began to soften from winter 2005 through summer 2006,^[40][41] NAR chief economist David Lereah predicted a "soft landing" for the market.^[42] However, based on unprecedented rises in inventory and a sharply slowing market throughout 2006, Leslie Appleton-Young, the chief economist of the California Association of Realtors, said that she was not comfortable with the mild term "soft landing" to describe what was actually happening in California's real estate market.^[43]

The Financial Times warned of the impact on the U.S. economy of the "hard edge" in the "soft landing" scenario, saying "A slowdown in these red-hot markets is inevitable. It may be gentle, but it is impossible to rule out a collapse of sentiment and of prices. ... If housing wealth stops rising ... the effect on the world's economy could be depressing indeed".^[44] "It would be difficult to characterize the position of home builders as other than in a hard landing", said Robert I. Toll, CEO of Toll Brothers.^[45]

Angelo Mozilo, CEO of Countrywide Financial, said "I've never seen a soft-landing in 53 years, so we have a ways to go before this levels out. I have to prepare the company for the worst that can happen."^[46] Following these reports, Lereah admitted that "he expects home prices to come down 5% nationally", and said that some cities in Florida and California could have "hard landings."^[47]

The World Bank lowered the global economic growth rate due to a housing slowdown in the United States, but it did not believe that the U.S. housing malaise would further spread to the rest of the world. The Fed chairman Benjamin Bernanke said in October 2006 that there was currently a "substantial correction" going on in the housing market and that the decline of residential housing construction was one of the "major drags that is causing the economy to slow"; he predicted that the correcting market would decrease U.S. economic growth by about one percent in the second half of 2006 and remain a drag on expansion into 2007.^[48]

National home sales and prices both fell dramatically again in March 2007 according to NAR data, with sales down 13% to 482,000 from the peak of 554,000 in March 2006 and the national median price falling nearly 6% to $217,000 from the peak of $230,200 in July 2006. The plunge in existing-home sales was the steepest since 1989.^{[citation needed]} The new home market also suffered. The biggest year over year drop in median home prices since 1970 occurred in April 2007. Median prices for new homes fell 10.9 percent according to the U.S. Department of Commerce.^[49]

Others speculated on the negative impact of the retirement of the Baby Boom generation and the relative cost to rent on the declining housing market.^[50][51] In many parts of the United States, it was significantly cheaper to rent the same property than to purchase it; the national median mortgage payment is $1,687 per month, nearly twice the median rent payment of $868 per month.^[52]

Predictions of housing bubble bursting

 

Robert Shiller

In 2005, economist Robert Shiller gave talks warning about a housing bubble to the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. He was ignored, and later called it an incidence of Groupthink. That same year, his second edition of Irrational Exuberance warned that the housing bubble might lead to a worldwide recession.^[53] Also in 2005, economist Fred Harrison commented: "The next property market tipping point is due at end of 2007 or early 2008... The only way prices can be brought back to affordable levels is a slump or recession.”^[54] In January 2006, financial analyst Gary Shilling wrote an article entitled: “The Housing Bubble Will Probably Burst”.^[55][56] In May 2006, JPMorgan's Christopher Flanagan, director of global structured finance research, warned clients of a coming housing downturn.^[57] In August 2006, economist Nouriel Roubini similarly warned that the housing sector was in "free fall" and would derail the rest of the economy, causing a recession in 2007.^[58] Joseph Stiglitz, winner of the 2001 Nobel Prize in economics, also said that the U.S. might enter a recession as house prices declined.^[59]

Major downturn and subprime mortgage collapse, 2007

 

A graph showing the median and average sales prices of new homes sold in the United States between 1963 and 2008.^[60]

 

A graph showing the monthly median and average sales prices of new homes sold in the United States between 1999 and 2009.^[61]

Inventory of houses for sale in Phoenix, AZ from July 2005 through March 2006. As of March 10, 2006, well over 14,000 (nearly half) of these for-sale homes were vacant. (Source: Arizona Regional Multiple Listing Service.)

 

Incomplete housing development near Houston, Texas.

 

Sales prices of homes sold 2002–2010.

The White House Council of Economic Advisers lowered its forecast for U.S. economic growth in 2008 from 3.1 per cent to 2.7 per cent and forecast higher unemployment, reflecting the turmoil in the credit and residential real-estate markets. The Bush administration economic advisers also revised their unemployment outlook and predicted the unemployment rate could rise slightly above 5 per cent, up from the prevailing unemployment rate of 4.6 per cent.^[62]

The appreciation of home values far exceeded the income growth of many of these homebuyers, pushing them to leverage themselves beyond their means. They borrowed even more money in order to purchase homes whose cost was much greater than their ability to meet their mortgage obligations. Many of these homebuyers took out adjustable-rate mortgages during the period of low interest rates in order to purchase the home of their dreams. Initially, they were able to meet their mortgage obligations thanks to the low "teaser" rates being charged in the early years of the mortgage.

As the Federal Reserve Bank applied its monetary contraction policy in 2005, many homeowners were stunned when their adjustable-rate mortgages began to reset to much higher rates in mid-2007 and their monthly payments jumped far above their ability to meet the monthly mortgage payments. Some homeowners began defaulting on their mortgages in mid-2007, and the cracks in the U.S. housing foundation became apparent.

Subprime mortgage industry collapse

Main article: Subprime mortgage crisis

In March 2007, the United States' subprime mortgage industry collapsed due to higher-than-expected home foreclosure rates, with more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale.^[63] The stock of the country's largest subprime lender, New Century Financial, plunged 84% amid Justice Department investigations, before ultimately filing for Chapter 11 bankruptcy on 2 April 2007 with liabilities exceeding $100 million (~$128 million in 2021).^[64]

The manager of the world's largest bond fund PIMCO, warned in June 2007 that the subprime mortgage crisis was not an isolated event and would eventually take a toll on the economy and impact the impaired prices of homes.^[65] Bill Gross, "a most reputable financial guru", sarcastically and ominously criticized the credit ratings of the mortgage-based CDOs now facing collapse:

AAA? You were wooed Mr. Moody's and Mr. Poor's, by the makeup, those six-inch hooker heels, and a "tramp stamp." Many of these good looking girls are not high-class assets worth 100 cents on the dollar. ... And sorry Ben, but derivatives are a two-edged sword. Yes, they diversify risk and direct it away from the banking system into the eventual hands of unknown buyers, but they multiply leverage like the Andromeda strain. When interest rates go up, the Petri dish turns from a benign experiment in financial engineering to a destructive virus because the cost of that leverage ultimately reduces the price of assets. Houses anyone? ... AAAs? [T]he point is that there are hundreds of billions of dollars of this toxic waste and whether or not they're in CDOs or Bear Stearns hedge funds matters only to the extent of the timing of the unwind. [T]he subprime crisis is not an isolated event and it won't be contained by a few days of headlines in The New York Times ... The flaw lies in the homes that were financed with cheap and in some cases gratuitous money in 2004, 2005, and 2006. Because while the Bear hedge funds are now primarily history, those millions and millions of homes are not. They're not going anywhere ... except for their mortgages that is. Mortgage payments are going up, up, and up ... and so are delinquencies and defaults. A recent research piece by Bank of America estimates that approximately $500 billion (~$639 billion in 2021) of adjustable rate mortgages are scheduled to reset skyward in 2007 by an average of over 200 basis points. 2008 holds even more surprises with nearly $700 billion ARMS subject to reset, nearly ¾ of which are subprimes ... This problem—aided and abetted by Wall Street—ultimately resides in America's heartland, with millions and millions of overpriced homes and asset-backed collateral with a different address—Main Street.^[66]

Financial analysts predicted that the subprime mortgage collapse would result in earnings reductions for large Wall Street investment banks trading in mortgage-backed securities, especially Bear Stearns, Lehman Brothers, Goldman Sachs, Merrill Lynch, and Morgan Stanley.^[63] The solvency of two troubled hedge funds managed by Bear Stearns was imperliled in June 2007 after Merrill Lynch sold off assets seized from the funds and three other banks closed out their positions with them. The Bear Stearns funds once had over $20 billion of assets, but lost billions of dollars on securities backed by subprime mortgages.^[67]

H&R Block reported a quarterly loss of $677 million on discontinued operations, which included subprime lender Option One, as well as writedowns, loss provisions on mortgage loans and the lower prices available for mortgages in the secondary market for mortgages. The units net asset value fell 21% to $1.1 billion (~$1.41 billion in 2021) as of April 30, 2007.^[68] The head of the mortgage industry consulting firm Wakefield Co. warned, "This is going to be a meltdown of unparalleled proportions. Billions will be lost." Bear Stearns pledged up to US$3.2 billion (~$4.09 billion in 2021) in loans on 22 June 2007 to bail out one of its hedge funds that was collapsing because of bad bets on subprime mortgages.^[69]

Peter Schiff, president of Euro Pacific Capital, argued that if the bonds in the Bear Stearns funds were auctioned on the open market, much weaker values would be plainly revealed. Schiff added, "This would force other hedge funds to similarly mark down the value of their holdings. Is it any wonder that Wall street is pulling out the stops to avoid such a catastrophe? ... Their true weakness will finally reveal the abyss into which the housing market is about to plummet."^[70]

A New York Times report connected the hedge fund crisis with lax lending standards: "The crisis this week from the near collapse of two hedge funds managed by Bear Stearns stems directly from the slumping housing market and the fallout from loose lending practices that showered money on people with weak, or subprime, credit, leaving many of them struggling to stay in their homes."^[69]

In the wake of the mortgage industry meltdown, Senator Chris Dodd, Chairman of the Banking Committee held hearings in March 2007 and asked executives from the top five subprime mortgage companies to testify and explain their lending practices. Dodd said, "Predatory lending practices endangered the home ownership for millions of people".^[71] Moreover, Democratic senators such as Senator Charles Schumer of New York were proposing a federal government bailout of subprime borrowers in order to save homeowners from losing their residences. Opponents of such proposal asserted that government bailout of subprime borrowers was not in the best interests of the U.S. economy because it would set a bad precedent, create a moral hazard, and worsen the speculation problem in the housing market.

Lou Ranieri of Salomon Brothers, inventor of the mortgage-backed securities market in the 1970s, warned of the future impact of mortgage defaults: "This is the leading edge of the storm. ... If you think this is bad, imagine what it's going to be like in the middle of the crisis." In his opinion, more than $100 billion of home loans are likely to default when the problems in the subprime industry appear in the prime mortgage markets.^[72] Fed Chairman Alan Greenspan praised the rise of the subprime mortgage industry and the tools used to assess credit-worthiness in an April 2005 speech:

Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country ... With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. ... Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.^[73]

Because of these remarks, along with his encouragement for the use of adjustable-rate mortgages, Greenspan was criticized for his role in the rise of the housing bubble and the subsequent problems in the mortgage industry.^[74][75]

Alt-A mortgage problems

Subprime and Alt-A loans account for about 21 percent of loans outstanding and 39 percent of mortgages made in 2006.^[76]

In April 2007, financial problems similar to the subprime mortgages began to appear with Alt-A loans made to homeowners who were thought to be less risky.^[76] American Home Mortgage said that it would earn less and pay out a smaller dividend to its shareholders because it was being asked to buy back and write down the value of Alt-A loans made to borrowers with decent credit; causing company stocks to tumble 15.2 percent. The delinquency rate for Alt-A mortgages has been rising in 2007.^[76]

In June 2007, Standard & Poor's warned that U.S. homeowners with good credit are increasingly falling behind on mortgage payments, an indication that lenders have been offering higher risk loans outside the subprime market; they said that rising late payments and defaults on Alt-A mortgages made in 2006 are "disconcerting" and delinquent borrowers appear to be "finding it increasingly difficult to refinance" or catch up on their payments.^[77] Late payments of at least 90 days and defaults on 2006 Alt-A mortgages have increased to 4.21 percent, up from 1.59 percent for 2005 mortgages and 0.81 percent for 2004, indicating that "subprime carnage is now spreading to near prime mortgages".^[66]

COVID-19 impact

The COVID-19 pandemic raised the spectre of a U.S. housing market collapse due to "“The confluence of high unemployment and the end of the forbearance measures."^[78] Regional weakness in the spring housing market in San Francisco was attributed to the pandemic, as shelter-in-place orders went into effect, and at a time the market would usually be rising.^[79]

Foreclosure rates increase

 

House in Salinas, California under foreclosure, following the bursting of the U.S. real estate bubble.

The 30-year mortgage rates increased by more than a half a percentage point to 6.74 percent during May–June 2007,^[80] affecting borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the NAR reported that supply of unsold homes is at a record 4.2 million.

Goldman Sachs and Bear Stearns, respectively the world's largest securities firm and largest underwriter of mortgage-backed securities in 2006, said in June 2007 that rising foreclosures reduced their earnings and the loss of billions from bad investments in the subprime market imperiled the solvency of several hedge funds. Mark Kiesel, executive vice president of a California-based Pacific Investment Management Co. said,

It's a blood bath. ... We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.^[81]

According to Donald Burnette of Brightgreen Homeloans in Florida (one of the states hit hardest by the bursting housing bubble) the corresponding loss in equity from the drop in housing values caused new problems. "It is keeping even borrowers with good credit and solid resources from refinancing to much better terms. Even with tighter lending restrictions and the disappearance of subprime programs, there are many borrowers who would indeed qualify as "A" borrowers who can't refinance as they no longer have the equity in their homes that they had in 2005 or 2006. They will have to wait for the market to recover to refinance to the terms they deserve, and that could be years, or even a decade." It is foreseen, especially in California, that this recovery process could take until 2014 or later.^[81]

A 2012 report from the University of Michigan analyzed data from the Panel Study of Income Dynamics (PSID), which surveyed roughly 9,000 representative households in 2009 and 2011. The data seemed to indicate that, while conditions were still difficult, in some ways the crisis was easing: Over the period studied, the percentage of families behind on mortgage payments fell from 2.2 to 1.9; homeowners who thought it was "very likely or somewhat likely" that they would fall behind on payments fell from 6% to 4.6% of families. On the other hand, family's financial liquidity had decreased: "As of 2009, 18.5% of families had no liquid assets, and by 2011 this had grown to 23.4% of families."^[82][83]

See also

• Economic crisis of 2008
• Creative Real Estate Investing
• Deed in lieu of foreclosure
• Foreclosure consultant
• List of entities involved in 2007-2008 financial crises
• dot-com bubble

General:

• Real estate pricing
• Real estate appraisal
• Real estate economics
• Real estate trends

International property bubbles:

• Chinese property bubble
• British property bubble
• Irish property bubble
• Japanese asset price bubble
• Spanish property bubble

Further reading

• Muolo, Paul; Padilla, Matthew (2008). Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis. Hoboken, New Jersey: John Wiley and Sons. ISBN 978-0-470-29277-8.

References and notes

1. Palmer, Christopher (2013-11-15). (PDF). Archived from the original (PDF) on 2017-05-17. Retrieved 2014-10-01.
2. "A smoking gun? | The Economist". The Economist.
3. The Financial Crisis Inquiry Report - Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (PDF). The Financial Crisis Inquiry Commission. January 2011. ISBN 978-0-16-087983-8.
4. Redfin (1970-01-01). "Home Buying Guide". Redfin. Retrieved 2022-03-20.
5. "Symposium: Did Alan Greenspan's Federal Reserve Cause the Housing Bubble? – WSJ". Wall Street Journal. 27 March 2009.
6. "Home". irrationalexuberance.com.
7. Case, Karl E.; Shiller, Robert J. "Is there a bubble in the housing market?" (PDF). Brookings Papers in Economic Activity. Cowles Foundation for Research in Economics, Yale University. Cowles Foundation Paper No. 1089.
8. Shiller, Robert (2005). Irrational Exuberance (2d ed.). Princeton University Press. ISBN 0-691-12335-7.
9. Max, Sarah (27 July 2004). "The bubble question: How will rising interest rates affect housing prices?". CNN. There has never been a run up in home prices like this.
10. Searjeant, Graham (27 August 2005). "US heading for house price crash, Greenspan tells buyers". The Times. London. Retrieved 26 May 2010. Alan Greenspan, the United States' central banker, warned American homebuyers that they risk a crash if they continue to drive property prices higher. ... On traditional tests, about a third of U.S. local homes markets are now markedly overpriced.
11. Zweig, Jason (8 May 2006). "Buffett: Real estate slowdown ahead; The Oracle of Omaha expects the housing market to see "significant downward adjustments", and warns on mortgage financing". CNN. Once a price history develops, and people hear that their neighbor made a lot of money on something, that impulse takes over, and we're seeing that in commodities and housing ... Orgies tend to be wildest toward the end. It's like being Cinderella at the ball. You know that at midnight everything's going to turn back to pumpkins & mice. But you look around and say, 'one more dance,' and so does everyone else. The party does get to be more fun—and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice.
12. Gregory Zuckerman (5 July 2006). "Surviving a Real-Estate Slowdown: A 'Loud Pop' Is Coming, But Mr. Heebner Sees Harm Limited to Inflated Regions". The Wall Street Journal. A significant decline in prices is coming. A huge buildup of inventories is taking place, and then we're going to see a major [retrenchment] in hot markets in California, Arizona, Florida and up the East Coast. These markets could fall 50% from their peaks.
13. Lon Witter (21 August 2006). "The No-Money-Down Disaster". Barron's.
14. Kathy Jones (8 August 2006). "Bubble Blog: A popular blogger explains how he predicted the cooling of the real estate market and what the mainstream business press can learn from sites like his". Newsweek.
15. Krugman, Paul (2 January 2006). "No bubble trouble?". The New York Times. Part of the rise in housing values since 2000 was justified given the fall in interest rates, but at this point the overall market value of housing has lost touch with economic reality. And there's a nasty correction ahead.
16. Paul J. Lim (13 June 2006). . U.S. News & World Report. Archived from the original on 4 July 2007. Retrieved 22 October 2017.
17. Mary Umberger (5 October 2006). "Study sees '07 'crash' in some housing". Chicago Tribune.
18. Clabaugh, Jeff (5 October 2006). "Moody's predicts big drop in Washington housing prices". Washington Business Journal.
19. Dean Baker (August 2002). "The Run-Up in Home Prices: Is it Real or Is it Another Bubble?".
20. " Jdouche (November 2, 2008). "Peter Schiff Was Right 2006 – 2007 (2nd Edition)". Archived from the original on 2021-12-21.
21. Peter Schiff (February 26, 2007). "Crash Proof:How to Profit From the Coming Economic Collapse". ISBN 9781118038932.
22. "The Truth About Fannie and Freddie's Role in the Housing Crisis". Reason.com. 2011-03-04. Retrieved 2014-02-21.
23. Lereah, David (17 August 2006). . National Association of Realtors Leadership Summit. Archived from the original (PPT) on 1 September 2006. Retrieved 1 July 2007. NAR plot of Condominium Price Appreciation (percentages) in the south and west United States, 2002–2006:

    Condominium Price Appreciation (percentages) in the south and west United States, 2002–2006. (Source: NAR.)

24. Blanton, Kimberly (26 April 2006). "Housing slowdown deepens in Mass.: Single-family prices, sales slip in March". The Boston Globe.
25. Blanton, Kimberly (11 January 2006). "Adjustable-rate loans come home to roost: Some squeezed as interest rises, home values sag". The Boston Globe.
26. . Boston Herald. 29 August 2006. Archived from the original on November 10, 2006.
27. Blanton, Kimberly (9 December 2005). "Sellers chop asking prices as housing market slows: Cuts of up to 20% are now common as analysts see signs of a 'hard landing'". The Boston Globe.
28. Laing, Jonathan R. (20 June 2005). "The Bubble's New Home". Barron's. The home-price bubble feels like the stock-market mania in the spring of 1999, just before the stock bubble burst in early 2000, with all the hype, herd investing and absolute confidence in the inevitability of continuing price appreciation. My blood ran slightly cold at a cocktail party the other night when a recent Yale Medical School graduate told me that she was buying a condo to live in Boston during her year-long internship, so that she could flip it for a profit next year. Tulipmania reigns. Plot of inflation-adjusted home price appreciation in several U.S. cities, 1990–2005:

    Plot of inflation-adjusted home price appreciation in several U.S. cities, 1990–2005.

29. Paul Magnusson; Stan Crock; Peter Coy (19 December 2005). . BusinessWeek. Archived from the original on December 11, 2005.
30. "Can San Diego Home Prices Affect Coeur d'Alene Pricing?". Real Estate CDA. 28 October 2014.
31. This article classified several U.S. real-estate regions as "Dead Zones", "Danger Zones", and "Safe Havens."

    Fortune magazine Housing Bubble "Dead Zones"

    "Dead Zones"	"Danger Zones"	"Safe Havens"
    Boston	Chicago	Cleveland
    Las Vegas	Los Angeles	Columbus
    Miami	New York	Dallas
    Washington, D.C. / Northern Virginia	San Francisco / Oakland	Houston
    Phoenix	Seattle	Kansas City
    Sacramento		Omaha
    San Diego		Pittsburgh

    Tully, Shawn (4 May 2006). "Welcome to the Dead Zone". Fortune. Welcome to the dead zone: The great housing bubble has finally started to deflate, and the fall will be harder in some markets than others.

32. Tully, Shawn (25 August 2005). "Getting real about the real estate bubble: Fortune's Shawn Tully dispels four myths about the future of home prices". Fortune.
33. "Over 14,000 Phoenix For-Sale Homes Vacant". March 10, 2006. Plot of Phoenix inventory:

    Inventory of houses for sale in Phoenix, AZ from July 2005 through March 2006. As of March 10, 2006, well over 14,000 (nearly half) of these for-sale homes are vacant. (Source: Arizona Regional Multiple Listing Service.)

34. 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.
35. "Toll Brothers, Inc. (NYSE:TOL)". MarketWatch.
36. "DJ US Home Construction Index". MarketWatch. Retrieved 18 August 2006.
37. "Toll Brothers lowers outlook: Luxury home builder says buyers still waiting on sidelines". MarketWatch. 22 August 2006.
38. "BANKRUPTCY CONSIDERED: Kara Homes lays off staff; talk of filing for Chapter 11 makes local clients anxious". Asbury Park Press. 6 October 2006.^{[dead link]}
39. "Kara Homes buyers may lose deposits". Asbury Park Press. 10 April 2007.^{[dead link]}
40. Fleckenstein, Bill (24 April 2006). . msnbc.com. Archived from the original on 30 April 2010. Retrieved 1 July 2007. Reports of falling sales and investors stuck with properties they can't sell are just the beginning. Property owners should worry; so should their lenders.
41. Peters, Jeremy W. (26 July 2006). "Sales Slow for Homes New and Old". The New York Times. Retrieved 26 May 2010. A variety of experts now say, the housing industry appears to be moving from a boom to something that is starting to look a lot like a bust
42. Lereah, David (1 January 2006). . Forbes. Archived from the original on October 13, 2007.
43. Appleton-Young, Leslie (21 July 2006). "Housing Expert: 'Soft Landing' Off Mark". Los Angeles Times. Leslie Appleton-Young is at a loss for words. The chief economist of the California Assn. of Realtors has stopped using the term 'soft landing' to describe the state's real estate market, saying she no longer feels comfortable with that mild label. ... 'Maybe we need something new. That's all I'm prepared to say,' Appleton-Young said Thursday. ... The Realtors association last month lowered its 2006 sales prediction. That was when Appleton-Young first told the San Diego Union-Tribune that she didn't feel comfortable any longer using 'soft landing.' 'I'm sorry I ever made that comment,' she said Thursday. ... For real estate optimists, the phrase 'soft landing' conveyed the soothing notion that the run-up in values over the last few years would be permanent.
44. "Hard edge of a soft landing for housing". Financial Times. 19 August 2006.
45. Toll, Robert (23 August 2006). "Housing Slump Proves Painful For Some Owners and Builders: 'Hard Landing' on the Coasts Jolts Those Who Must Sell; Ms. Guth Tries an Auction; 'We're Preparing for the Worst'". The Wall Street Journal.
46. Mozilo, Angelo (9 August 2006). . The Wall Street Journal. Archived from the original on 20 January 2007. Retrieved 1 July 2007.
47. Lereah, David (24 August 2006). "Existing home sales drop 4.1% in July, median prices drop in most regions". USA Today.
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51. "Editorial: It Was Fun While It Lasted". The New York Times. 5 September 2006. With economic signals flashing that the housing boom is over, speculation has now turned to how deep the slump will be and how long it will last ... conventional wisdom holds that as long as you don't plan to sell your house any time soon ... you can cash in later. Or can you? The downturn in housing is overlapping with the retirement of the baby boom generation, which starts officially in 2008 ... Most of them are homeowners, and many of them will presumably want to sell their homes, extracting some cash for retirement in the process. Theoretically, that implies a glut of houses for sale, which would surely mitigate an upturn in prices, and could drive them ever lower. ... The house party is over, but we don't yet know how bad the hangover is going to be.
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    With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. The widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets cost reductions tend to be passed through to borrowers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.
74. Roach, Stephen S. (16 March 2007). "The Great Unraveling". Morgan Stanley. In early 2004, he urged homeowners to shift from fixed to floating rate mortgages, and in early 2005, he extolled the virtues of sub-prime borrowing—the extension of credit to unworthy borrowers. Far from the heartless central banker that is supposed to "take the punch bowl away just when the party is getting good," Alan Greenspan turned into an unabashed cheerleader for the excesses of an increasingly asset-dependent U.S. economy. I fear history will not judge the Maestro's legacy kindly.
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