The national median existing-home price will probably slip 0.7 percent to $220,300 in 2007, following a 1.0 percent rise last year.
I think the housing bubble was driven not just by the need for investors to put their money somewhere else other than technology stocks but also by the terrorist attacks in September, 2001. There were two responses - physical and psycological. Many Americans moved to new towns where they would feel safer. And I believe people wanted to own a tangible asset. People feel safer now -> stock market is up -> house prices are recovering to normal levels.
The problem is not Adjustable Rate Mortgages (ARM) or the lending institutions. The market will take care of financiers that made unwise loans. And ARMs are one tool out of many for buying a house. People were free to choose an ARM or a standard 30 year mortgage. Perhaps panic was a component of people choosing ARMs? -so they could get a house before the next attack. Afterall, shelter is one of the basic needs.
