| Prior to 2000, the real estate market and the economy | | | | significance and size of the U.S. real estate market, our |
| were always cyclical. For instance, the US housing | | | | analysis will focus on U.S. real estate, which is currently |
| prices tended to weaken as the GDP and | | | | quite representative of markets around the world.U.S. |
| employment prospects declined, particularly during the | | | | Real EstateIn 2005, America's real estate boom was |
| recessions of 1980 and 1990. The economic downturn | | | | strong, with prices up by 13%. But there were signs |
| of 2000-01 defied many predictions by having the | | | | that the market was weakening. Sales of existing |
| opposite impact on real estate prices. Over the past | | | | homes fell this January to the lowest in nearly two |
| five years, real estate prices have increased | | | | years. Meanwhile, the number of unsold homes rose to |
| approximately 10%, outperforming equities by a wide | | | | the highest level since 1998. In addition, new homes |
| margin.Historically, real estate has been viewed by | | | | continue to be built at the fastest pace since 1973. In |
| many as a good hedge against inflation. During the last | | | | other words, while the supply of housing is at the |
| five years however, real estate prices have exceeded | | | | highest level, demand for homes has fallen dramatically, |
| the rate of inflation by a gross margin.Given the | | | | rendering a downward price adjustment inevitable. |