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Home Sweet Home: The Housing Market in Perspective

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In the aftermath of the housing market crash of 2008, we have come to realize just how important home ownership is to our nation's economy. Nicknamed, "The American Dream," the idea of home ownership has been a part of the fabric of America for decades. Because it was so critical, during the mid 1990's, the Clinton administration resurrected an old law, namely, The Community Reinvestment Act of 77 (CRA). This act put teeth (i.e.; penalties) into the idea that banks must lend to subprime borrowers so the American Dream could be realized by more individuals. I have little doubt that Clinton and Bush (43) used this to their political advantage (ex: more homeowners = more votes). But I digress. The following chart shows how the percentage of home ownership rose sharply beginning in 1995.

As homeownership continued to rise, so did home prices. Ownership peaked in 2004 before beginning its descent. When the bubble burst, many homes were abandoned and average home prices turned south as can be seen in the following chart.

Most believe the housing market needs to be strong for the economy to recover. I agree. In order  for the housing market to rebound, the unemployment rate must be substantially lower than it is today. Will prices rise from here? Has the housing market hit the bottom? Perhaps, but we'll have to wait and see. One thing's for sure, until we can get Americans back to work, the housing market will have a tougher time recovering.