2007 Real Estate 2008 - Part 1
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
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