The factors stimulating the excess demand have been well documented (e.g., historically low interest rates, lax lending standards, rapidly rising house prices, invasion of investors/speculators) and resulted in a surge in sales and production, increasing the number of excess vacant housing units by an estimated 1.1 to 2.3 million by the first quarter of 2008.

House prices have declined from peak levels at the height of the housing boom according to a range of measures. Prices are approaching trend levels from the 1990s, adjusted for changes in mortgage interest rates and income growth. Price stabilization, with its positive implications for reducing foreclosures, will be a critical factor in the reduction of unsold inventories.

Fundamental demand factors, as opposed to excess demand, will ultimately shepherd the inventory to more normal levels, allowing production to return to more robust levels, but the precise timing of this process is highly uncertain. The dynamics of the return to trend levels of production will depend on production levels during the period of adjustment as well as on key drivers of housing demand ?EUR??,,????'??+including properly functioning credit markets, appropriate mortgage lending standards, house price conditions, general economic conditions and consumer confidence.

The underlying trends in fundamental demand factors point toward the need for 1.9 to 2.0 million housing units per year ?EUR??,,????'??+composed of 1.5 million single family units, between 350 and 400 thousand multifamily units, and between 100 and 150 thousand manufactured homes.