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2007 Mortgage Correction
(BETHESDA REAL ESTATE) Dave Stevens, President of Affiliated Businesses, at Long & Foster wrote this excellent article on the current state of the mortgage correction...
The 2007 Mortgage Correction and the Recovery Ahead
 
With the lowering of the discount rate by ½% the Federal Reserve took the first major step to lead the way in establishing a path towards the next stage of the housing cycle. The following will highlight for you the steps that created the current market climate and the reasons why we are poised for recovery in the mid-Atlantic markets.
The beginning of the big change
Since the peak in mid 2005, the sale of existing and new homes has slowed, reflecting a correction long overdue after an almost decade long un-interrupted period of housing growth and house price appreciation (hpa). This housing slowdown was aided by two key items that helped stall the market beyond any natural timing of the overdue economic cycle. First, we saw a slight increase from the record low interest rates of 2003. As the graph below reflects, interest rates adjusted in 2003 and the corrective period following only foreshadowed the subsequent housing correction in 2005 as the steam from excessive liquidity was impacted by these rising ... more

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