The U. S. Housing Market Crash: Why Did It Happen

TABLE OF CONTENTS

BACKGROUND 3

DICUSSION OF RESULTS 5

SUMMARY 8

REFERENCES 9

APPENDIX 10

The U.S. Housing Market Crash: Why did it happen?

Background

In 2007, the United States Housing market hit an all time high with the median price at $247,000 and the average price at $331,600; then the housing bubble burst and the market collapsed. The last government housing price census concluded that the median price was $216,700 and the average price was $270,900 (Census 2009). That’s a price drop of the median price of $30,300 and a drop of the average price of $60,701. The housing market was the base of our deck of cards and once the bottom fell out, it caused the ripple effect that was felt around the world. With the American dollar falling imports fell drastically the only thing saving us from rock bottom was that exports increased dramatically. Without the American dollar buying power by our side; the foreign made materials were harder to come by. Because of these factors the housing construction industry coming to a halt almost overnight and so many of our fellow Americans were getting pink slips by the end of the week. What could have caused such a drastic change in our economy in just a few years? This projects goal is to determine the effects on the prices of existing single-family homes for the nation. These figures will include condos and co-ops, in the addition to single-family homes (Realtor 2010). The statistical and demographic data points for this study will be taken from the U.S. Census Bureau and the National Association of Realtors. The model (less constants and coefficients is):

OUTPUT = SINGLE_FAMILY_PRICE_INDEX + NEW_CONSTRUCTION + AVERAGE_INCOME + POP_GROWTH

The result or dependent variable, SINGLE_FAMILY_PRICE_INDEX, includes the overall price of a single-family home; the data will include the figures for condos and co-ops. This variable is calculated using the price to income ratio,...