Microeconomics

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Microeconomics : Article Review

Article Summary

There is less to expect on the U .S . housing industry in the next coming years as home prices continues to drop in the market . Based from the data presented by the Standard Poor 's /Case-Shiller Index , home prices on 20 major cities of the United States dropped to nearly 13 percent since the first quarter of 2006 to February 2007 and was the sharpest decline ever recorded from the data 's two-decade history

(Reddy 1 . s

It was identified that one of the primary reason of the down turn of housing industry 's stability would be the tight lending terms from various financial institution and the weakening of the U .S . economy caused by issues concerning the labor market , and the depreciating demand of the consumers in the market . Furthermore , those cities that showed booming housing market before 2006 are now presently suffering from the steepest price drop relative to other cities in the United States . Since 2006 , the Standard Poor 's /Case-Shiller Index recorded roughly 15 percent decline on the prices of housing units in the United States and expected to continue declining until reaching 25 percent decline level

Aside from the above mentioned economic factors that negatively affected the performance of the housing industry , the large surpluses of housing units that the housing industry recorded accelerated the pace of housing unit 's price drop in the market . At the end of the day , the figures that have been collected by various organizations are pointing for the worsening of housing industry 's performance in the market this year and the following years if the economic condition will not be solved by the federal government

Primary Economic Elements

It is clear in the article of Sudeep Reddy entitled Home-Price Drop Accelerates , Damping Hopes ' that the present unstable conditions of the housing market would continue to persist in the next coming years until the factors that contributes for its instability will be solved the government authorities . The housing units in the United States has been declining since 2006 after the demand of consumers significantly dropped caused by limited disposable income of households in the United States Wages of workers in the market was decreased by the end of 2005 creating enough avenues for American households to have limited disposable income . As a result consumers have been forced to hold their purchase of housing units in the market . In 2005 , the demand for housing units was high causing the housing companies to produce more housing units by the end of 2005 . But the expected high demand of consumers for housing units abruptly decline by the first quarter of 2006 leading for large surpluses on the supply of housing units in the market

This is what Reddy is trying to say on his article when he mentioned that the surpluses on the housing industry created enough force for the price drop of housing units in the market...