2000s United States housing bubble: Difference between revisions - Wikipedia
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Bubbles may be definitively identified only in hindsight, after a market correction,<ref name="Economist: After the Fall">A prediction of a correction in the housing market, possibly after the "[[autumn|fall]]" of 2005, is implied by ''[[The Economist]]'' magazine's cover story for the article "After the fall", which illustrates a brick falling, with the label "House Prices": [[:Image:Economist-06-15-2005.jpg]]. {{cite news |title=After the fall: Soaring house prices have given a huge boost to the world economy. What happens when they drop? | publisher=[[The Economist]] | date=[[16 June]] [[2005]] | url=http://www.economist.com/printedition/displaystory.cfm?Story_ID=4079458}}</ref> which began for the [[United States housing bubble|U.S. housing market]] in 2005–2006.<ref name="Barron's crisis"/><ref name="Fortune deadzone"/><ref name="BG ARM"/><ref name="BH Mass foreclosures"/><ref name="PHX homes vacant"/><ref name="Lereah hard landing"/><ref name="WP April 24 2007"/> Former U.S. [[Federal Reserve Board|Fed]] Chairman [[Alan Greenspan]] said "we had a [[economic bubble|bubble]] in housing"<ref name="Greenspan admits bubble NewsHour">{{cite news | title=Alan Greenspan Interview with Jim Lehrer |date=18 September [[2007]] | publisher=[[The NewsHour with Jim Lehrer]] | url=http://youtube.com/watch?v=yU4WjhijOMY }}</ref><ref name="Greenspan admits bubble FT">{{cite news | title=Greenspan alert on US house prices |date=17 September [[2007]] | publisher=[[Financial Times]] | url=http://www.ft.com/cms/s/0/31207860-647f-11dc-90ea-0000779fd2ac.html }}</ref> and also said in the wake of the [[United States housing bubble#Subprime mortgage industry collapse|subprime mortgage and credit crisis]] in [[2007]], “I really didn't get it until very late in [[2005]] and [[2006]].”<ref name="Greenspan didn't get it">{{cite news | title=Greenspan says didn't see subprime storm brewing |date=13 September [[2007]] | publisher=[[Reuters]] | url=http://biz.yahoo.com/rb/070913/usa_economy_greenspan.html?.v=4 }}</ref> The [[United States housing bubble#Subprime mortgage industry collapse|mortgage and credit crisis]] was caused by a large number of home owners unable to pay the mortgage as their home values declined. [[Freddie Mac]] CEO Richard Syron concluded, "We had a bubble,"<ref name="subprime shockwaves">{{cite news | title=Subprime shockwaves | publisher=[[Bloomberg]] | date=[[19 July]] [[2007]] | url=http://www.paperdinero.com/BNN.aspx?id=288 }}</ref> and concurred with [[Yale University|Yale]] economist [[Robert Shiller]]'s warning that home prices appear overvalued and that the correction could last years with trillions of dollars of home value being lost.<ref name="subprime shockwaves"/> Greenspan warned of "large double digit declines" in home values "larger than most people expect."<ref name="Greenspan admits bubble FT"/> Problems for home owners with good credit surfaced in mid-[[2007]], causing the U.S.'s largest mortgage lender [[Countrywide Financial]] to warn that a recovery in the housing sector is not expected to occur at least until [[2009]] because home prices are falling “almost like never before, with the exception of the [[Great Depression]].”<ref name="CFC warning">{{cite news | title=Lender Sees Mortgage Woes for ‘Good’ Risks | publisher=[[New York Times]] | date=[[25 July]] [[2007]] | url=http://www.nytimes.com/2007/07/25/business/25lend.html?ei=5070&en=c716081c126aa120&ex=1186027200&adxnnl=1&emc=eta1&pagewanted=print }}</ref> The impact of booming home valuations on the [[Economy of the United States|U.S. economy]] since the 2001–2002 [[recession]] was an important factor in the recovery because a large component of consumer spending came from the related refinancing boom, which simultaneously allowed people to reduce their monthly mortgage payments with lower interest rates and withdraw equity from their homes as values increased.<ref name="WeekStd bubble trouble">{{cite news |name=[[Andrew Laperriere]] |title=Housing Bubble Trouble: Have we been living beyond our means?|publisher=[[The Weekly Standard]]|date=[[10 April]] [[2006]] | url=http://www.weeklystandard.com/Content/Public/Articles/000/000/012/053ajgwr.asp}}</ref> Any collapse of the U.S. Housing Bubble has a direct impact not only on home valuations, but the nation's mortgage markets, home builders, home supply retail outlets, [[Wall Street]] [[hedge funds]] held by large institutional investors, and [[foreign bank]]s, increasing the risk of a nationwide recession.<ref name="CFC warning"/><ref name="WeekStd bubble trouble"/><ref name="Roubini free fall"/><ref name="RGE tramp stamp"/> Concerns about the impact of the collapsing housing and credit markets on the larger U.S. economy caused [[George W. Bush|President Bush]] and [[Federal Reserve System|Fed]] [[Chairman of the Federal Reserve|Chairman]] [[Ben Bernanke]] to announce a limited bailout of the U.S. housing market for homeowners unable to pay their mortgage debts.<ref name="Bush bailout">{{cite news |title=Bush Moves to Aid Homeowners|publisher=[[Wall Street Journal]]|date=[[31 August]] [[2007]] | url=http://online.wsj.com/article/SB118851742988914064.html?mod=googlenews_wsj}}</ref>
==Timeline==
[http://www.pinfy.com '''pinfy.com'''''Italic text'']
===Timeline 1985–ongoing===
*'''1985–1991''': [[Savings and Loan crisis]]
**'''January 1989''': One-month drop sales of 12.6 percent.<ref>{{cite web|url=http://www.washingtonpost.com/wp-dyn/content/article/2007/04/24/AR2007042400627.html|title=Existing-Home Sales Fall Steeply|author= Nancy Trejos}}</ref>
**'''1986–1991''': New homes constructed dropped from 1.8 to 1 million, the lowest rated since World War II.<ref>{{cite news |title=Housing Finance in Developed Countries An International Comparison of Efficiency, United States
| url=http://www.fanniemaefoundation.org/programs/jhr/pdf/jhr_0301_ch6_USA.pdf |date=1992 |publisher= Fannie Mae }}</ref>
*'''1991–1997''': Flat Housing prices
**'''1991''': US recession, new construction prices fall, but above inflationary growth allows them to return by 1997 in real terms.
**'''1997''': Mortgage denial rate of 29 percent for conventional home purchase loans<ref>{{cite news | title=Federal Financial Institutions Examination Council Press Releases| publisher=Federal Financial Institutions Examination Council |date=July 26, 2004
| url=http://www.ffiec.gov/hmcrpr/hm072604.htm//}}</ref>
**'''[[September 23]], [[1998]]''': New York Fed brings together consortium of investors to bail out [[Long-Term Capital Management]]
**'''1998''': Inflation-adjusted home price appreciation exceeds 10%/year in most West Coast metropolitan areas<ref>{{cite web|url=http://www.kansascityfed.org/publicat/sympos/2007/PDF/2007.08.01.Shiller.pdf|
title=Understanding Recent Trends in House Prices and Home Ownership|author=Robert J. Shiller}}</ref>
**'''1999''': [[Gramm-Leach-Bliley Act]], repealed the Glass-Steagall Act of 1933, allowed commercial and investment banks to consolidate.
**'''1995–2001''': [[Dot-com bubble]]
***'''[[March 10]], [[2000]]''': Dot-com bubble collapse NASDAQ Composite index peaked
*'''2000–2003''': [[Early 2000s recession]] (exact time varies by country)
*'''2001–2005''': United States housing bubble (part of [[United States housing bubble#See also|the world housing bubble]])
**'''2001''': US Federal Reserve lowers [[Federal funds rate]] 11 times, from 6.5% to 1.75%.<ref name="Fed lowers rates 11 times">{{cite web|url=http://www.federalreserve.gov/fomc/fundsrate.htm|title=Intended federal funds rate, Change and level, 1990 to present}}</ref>
**'''2002–2003''': Mortgage denial rate of 14 percent for conventional home purchase loans, half of 1997<ref>{{cite news | title=Federal Financial Institutions Examination Council Press Releases| publisher=Federal Financial Institutions Examination Council |date=July 26, 2004
| url=http://www.ffiec.gov/hmcrpr/hm072604.htm//}}</ref>
**'''2002''': Annual home price appreciation of 10% or more in [[California]], [[Florida]], and most Northeastern states.
**'''2004''': U.S. homeownership rate peaked with an all time high of 69.2 percent.<ref> {{cite news | title=CENSUS BUREAU REPORTS ON RESIDENTIAL VACANCIES AND HOMEOWNERSHIP |date=October 26, 2007| publisher= U.S. Census Bureau | url=http://www.census.gov/hhes/www/housing/hvs/qtr307/q307press.pdf }}</ref>
**'''2004–2005''': Arizona, California, Florida, Hawaii, and Nevada record price increases in excess of 25% per year.
*'''2005–ongoing''': [[United States housing market correction]] ("bubble bursting")
**'''2005''': Boom ended August 2005. The booming housing market halted abruptly for many parts of the U.S. in late summer of 2005.
**'''2006''': Continued market slowdown. Prices are flat, home sales fall, resulting in inventory buildup. U.S. Home Construction Index is down over 40% as of mid-August 2006 compared to a year earlier.
**'''2007''': Year-to-year decreases in both U.S. home sales and home prices accelerates rather than bottoming out, with U.S. Treasury secretary [[Hank Paulson|Paulson]] calling the "the housing decline ... the most significant risk to our economy."<ref name="Paulson 2007-10-17"/>
===Timeline 2007===