New Home SalesCENSUS
375K
U.S. Housing Market · 2009 · NBER recession
U.S. Housing Market in 2009
GFC troughQE1tax credit
Existing SalesNAR
4.34M
Median PriceNAR
$172,500
30Y MortgagePMMS
5.04%
2009 was the trough of the GFC housing crisis on paper, though the foreclosure cycle would still take three years to clear. New-home sales fell to 375,000 — the lowest reading since the series began in 1963.
The Federal Reserve initiated quantitative easing, buying $1.25T in mortgage-backed securities through 2010 to push mortgage rates lower. The 30-year fixed averaged 5.04%, the lowest since 1971. The first-time homebuyer tax credit (up to $8,000) ran from January 2009 to April 2010 and added meaningful but temporary demand. Median existing prices fell to $172,500.
Macroeconomic Context
The United States in 2009 experienced the worst economic contraction since the Great Depression. GDP fell approximately 2.6 percent for the full year, with the steepest declines in the first two quarters before stimulus and monetary policy began to bite. Unemployment peaked at 10.0 percent in October — the highest rate since 1983 — and net job losses for the year exceeded 5 million. Consumer price deflation briefly materialized in the first half of the year as energy prices remained depressed and household demand collapsed; the full-year CPI was -0.3 percent.
The policy response was aggressive and unprecedented. The Federal Reserve held the federal funds rate at essentially zero and launched its first Quantitative Easing program — QE1 — purchasing $1.25 trillion in mortgage-backed securities and $300 billion in Treasury bonds. The purchases were explicitly designed to push down mortgage rates and stimulate housing: the strategy worked, bringing the 30-year fixed to roughly 5.0 percent, meaningfully below where markets would have priced it without intervention. The $787 billion American Recovery and Reinvestment Act, signed in February, included an $8,000 first-time homebuyer tax credit that provided direct stimulus to the housing market.
Despite the economic devastation, housing transaction volumes bottomed during 2009. Distressed sales — foreclosures and short sales — accounted for a rising share of transactions, suppressing median prices well below non-distressed comparables. The National Bureau of Economic Research would later date the recession's end to June 2009, though the recovery that followed was historically slow. The foundation for a housing floor was being laid by policy, even as the human toll of foreclosures and negative equity mounted across millions of households.