The House Price Bubble Ends, the Foreclosure Wave Begins

Abstract

Things that cannot last come to an end, and so the sustained increase in housing prices came to a halt in the third quarter of 2006. The end of the bubble was caused by trends in economic fundamentals. By 2006 there was a significant excess supply of single family houses. Inventories of vacant homes for sale, both new and existing, were rising. The number of buyers willing to bet on continued house price increases proved insufficient to absorb the inventories. And so price increases ceased.