The Economist magazine said that "the worldwide rise in house prices is the biggest bubble in history,"[37] so any explanation must consider global causes as well as those specific to the United States. Former Federal Reserve Chairman Alan Greenspan said in mid-2005 that "at a minimum, there's a little 'froth' (in the U.S. housing market) … it's hard not to see that there are a lot of local bubbles." President Bush said of the U.S. housing boom in early 2006: "If houses get too expensive, people will stop buying them … Economies should cycle."[38]
Based on markedly declining 2006 market data, including lower sales, rising inventories, falling median prices, and increased foreclosure rates,[8] some economists have concluded that the correction in the U.S. housing market began in 2006.[15][39] A May 2006 Fortune magazine report on the US housing bubble states: "The great housing bubble has finally started to deflate … In many once-sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials."[6] The chief economist of Freddie Mac and the director of Harvard University's Joint Center for Housing Studies (JCHS) deny the existence of a national housing bubble and express doubt that any significant decline in home prices are possible, citing consistently rising prices since the Great Depression, expected increasing demand by the Baby Boom generation, and healthy employment.[40][41][42] However, some have questioned the funding that the JCHS receives from the real estate industry.[43] David Lereah, former chief economist of the National Association of Realtors, distributed "Anti-Bubble Reports" in August 2005 to "respond to the irresponsible bubble accusations made by your local media and local academics."[44] Among other statements, the reports say that people "should [not] be concerned that home prices are rising faster than family income", that "there is virtually no risk of a national housing price bubble based on the fundamental demand for housing and predictable economic factors", and that "a general slowing in the rate of price growth can be expected, but in many areas inventory shortages will persist and home prices are likely to continue to rise above historic norms."[45] Following reports of rapid sales declines and price depreciation in August 2006,[46][47] Lereah admitted that "he expects home prices to come down 5% nationally, more in some markets, less in others. And a few cities in Florida and California, where home prices soared to nose-bleed heights, could have 'hard landings'."[10]
National home sales and prices both fell dramatically in March 2007—the steepest plunge since 1989—according to NAR data, with sales down 13% to 482,000 from the peak of 554,000 in March 2006 and the national median price falling nearly 6% to $217,000 from the peak of $230,200 in July 2006 .[11]
John A. Kilpatrick, of Greenfield Advisors, was cited by Bloomberg News on June 14, 2007, on the linkage between increased foreclosures and localized housing price declines. "Living in an area with multiple foreclosures can result in a 10 percent to 20 percent decrease in property values." He went on to say, "In some cases that can wipe out the equity of homeowners or leave them owing more on their mortgage than the house is worth. The innocent houses that just happen to be sitting next to those properties are going to take a hit."[48] He echoed his own comments from the April 5, 2007, issue of the International Herald Tribune, in which he said, "Living on a block with multiple foreclosures can result in a 10 percent to 20 percent decrease in property values. In some cases that can wipe out the equity of homeowners or leave them owing more on their mortgage than the house is worth. If you see a neighborhood with a couple of foreclosures on the block, a couple of auction signs in the yards, that's going to be a neighborhood that's stigmatized. The innocent houses that just happen to be sitting next to those properties are going to take a hit."[49]
The US Senate Banking Committee held hearings on the housing bubble and related loan practices in 2006, titled "The Housing Bubble and its Implications for the Economy" and "Calculated Risk: Assessing Non-Traditional Mortgage Products".[50] Following the collapse of the subprime mortgage industry in March 2007, Senator Chris Dodd, Chairman of the Banking Committee held hearings and asked executives from the top five subprime mortgage companies to testify and explain their lending practices. Dodd said that "predatory lending practices" endangered the home ownership for millions of people.[51] Moreover, Democratic senators such as Senator Charles Schumer of New York are already proposing a federal government bailout of subprime borrowers in order to save homeowners from losing their residences