Decline in homeowners net worth Indirect economic effects of the subprime mortgage crisis

according s&p/case-shiller housing price index, november 2007, average u.s. housing prices had fallen approximately 8% mid-2006 peak , june 2008 approximately 20%. sales volume (units) of new homes dropped 26.4% in 2007 versus prior year. january 2008, inventory of unsold new homes stood @ 9.8 months based on december 2007 sales volume, highest level since 1981.

housing prices expected continue declining until inventory of surplus homes (excess supply) reduced more typical levels. mbs , cdo valuation related value of underlying housing collateral, mbs , cdo losses continue until housing prices stabilize.

as home prices have declined following rise of home prices caused speculation , re-financing standards have tightened, number of homes have been foreclosed , sit vacant. these vacant homes poorly maintained , attract squatters and/or criminal activity result increasing foreclosures in neighborhood serve further accelerate home price declines in area. rents have not fallen as home prices result in affluent neighborhoods homes formerly owner occupied occupied renters. in select areas falling home prices along decline in u.s. dollar have encouraged foreigners buy homes either occasional use and/or long term investments.

additional problems anticipated in future impending retirement of baby boomer generation. 2006 study securities industry association found significant proportion of baby boomers not saving adequately retirement , planned use increased property value piggy bank or replacement retirement-savings account. departure traditional american approach homes people worked toward paying off family house hand down children .