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