US HOUSING MARKET

“The Recent Decline of the Housing Market in the USA”

“The Recent Decline of the Housing Market in the USA”

Introduction

The housing industry has a significant effect on the economy and affects every person's life who is a homeowner or renter. The housing industry plays an important role on economic relations, individually, across the United States, the international market and economic globalization in terms of trade in building materials, like lumber, cement, and steel. Historically the government has tried assisting people with homeowners by supporting community development and increasing access to affordable housing.

The Federal Housing Administration (FDA) has a significant impact on the economic growth as the United States Department and urban development ensuring homeowners will have access to affordable loans. The Federal Reserve decides the interest rate for loans after discussion of the economy, the supply of money and speculating what direction the economy will take. This pace will be generated by the economy and the growth rate .Interest rates play an important role because interest rates can make mortgages less affordable and will have a negative impact on the housing industry.

Discussion

History and an Overview of the Industry

The housing industry is one of the most important sectors within the US economy. This is because housing is an essential need for everyone therefore, making it one of the leading spending of commodities in the country. Building new homes has being going on for centuries, during the great depression, the Federal Housing Administration (FHA) stimulated the housing industry helping with economic growth. In the fifties and early sixties, the housing industry was only affordable to the upper and middle class Americans, consequently, the United States Department of Housing and Urban Development (HUD), was founded in 1965 and their "mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination."

The FHA was then incorporated into the HUD helping to cover long-term mortgages which guaranteed that the loans were paid back to the banks.This is an economic indicator that uses the new housing construction and building permits to measure and estimate the amount of people that are buying new homes. The housing industry is also part of the leading indicator that economist developed "that indicate when a recession is about to occur and when the economy is in one" (Colander 2005). According to Investopedia, "This indicator isn't a huge market mover, but it has been reported by U.S. Census that the housing industry represents over 25% of investment dollars and a 5% value of the overall economy." (Ivestopedia 2006). "Housing starts are considered to be a leading indicator, meaning it detects trends in the economy looking forward. Declining housing starts show a slowing economy, while increases in housing activity can pull an economy out of a downturn." (Investopedia, 2006).

Housing Market from an Economic Standpoint

The economic data that is used by analysts to forecast new home construction is used to give an idea on other types of economic activities that are tied to ...