Here’s an outlined breakdown of real estate in transition 2007 – 2008.

What Went Wrong?

• Two things happened:
• Mortgage industry went largely unregulated
• Mortgage industry and Wall Street got the risk wrong
• Irresponsible/overly optimistic lending
• Substantial increase in subprime lending
• Aggressive lending
• Looser lending standards
• Increase in mortgage-backed securities

Bottom line… Both the Mortgage Industry and Wall Street tried to expand the pie that should not have been expanded.

What Resulted? Domino Effect on U.S. Housing

• Mortgage lenders pulled back
• Buyers found it difficult to obtain financing
• Housing inventory increased
• Sellers resisted dropping prices
• Homeowners default
• Now prices begin to drop

Looking at the Numbers:

Sales

• It was the worst drop in 19 years for Existing Home Sales
• Existing Home Sales
• Peaked in 2005 – 7.1M Transactions
• Sales down 13% from last year
• In the last 38 years, existing home sales have declined 4 times
• 1974 – 1 year
• 1979-1982 - 4 years
• 1989-1990 - 2 years
• 2006-2007 – 2 years so far

How long is this real estate recession going to last?

• The last time housing declined at a higher rate was in 1989
• Declined by 14%

Volume

2007 was the fifth best year ever for existing home sales volume.

• Existing Home Sales Volume = $1.502 trillion
• Down 14% from 2006 - $1.737 trillion
• A 2-year decrease of 20% from 1.886 trillion in 2005
• New Home Sales Volume = $241 billion
• Down 25% from 2006 - $322 billion
• A 2-year decrease of 37% from $381 billion in 2005

Prices

2007: First Decline since the Great Depression.

• Median Existing Home Price - $218,900
• Down 1.4% from 2006 - $221,900
• A 2-year decrease of 0.3% from 2005 - $219,600
• Median New Home Price - $246,900
• Up 0.2% from 2006 - $246,500
• A 2-year increase of 2.5% from 2005 - $240,900

2007 Real Estate 2008

• Part 1
• Part 2
• Part 3
• Part 4
• Part 5
• Part 6

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