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ll due to inflation. Domash (n.d.) stated that with buyers being able to afford homes in the past that rentals had declined. Now that people cannot afford buying, rentals are up four percent. Rentals are expected to increase over the next year. Rental rates are still more affordable than owning a home.

At this point, demands to purchase a home are weak. As foreclosures continue to increase, the market has more elasticity. It is possible that the elasticity will continue to increase. Eventually, the market will become inelastic due to people buying homes and the market becoming unsaturated. In reality, home prices are decreasing but the cost of living is increasing. In time, things will level out. When they do, supply of homes will drop and the prices of homes will increase. Typically, there is elasticity of supply in the real estate market. At this moment, we have an over production of new homes along with an increasing amount of foreclosures, which is affecting the elasticity.

New home construction has dropped to the lowest level in approximately 14 years. Builders have had to decrease production because of a decrease in demand. The real estate market has helped the economy tremendously. However, due to the decrease in building, there will be many layoffs in the construction field. Only the more skilled construction workers are getting to keep their jobs. During the construction boom wages increased. Now that there is a decline in building, the labor market is showing a decline in workers. Wages have not decreased at this time. However, wages could be forced to decline as demand slows.

How did we get here? From 2003 to 2005, interest rates were low. This spurred building and real estate sales. Financial institutions fueled the problem with adjustable loans. Financial institutions were also funding homes at 100% financing. Homes that were not affordable suddenly become affordable. The buyers who fell for this tactic were financially hurting. They did not realize the problem until their mortgage payment started to increase.

This is just the beginning of the crisis. The homes that have been foreclosed on so far are on borrowers who were offered these loans in the very beginning. Most of these homeowners now have negative equity. With the increase in foreclosures, it is causing home prices to decrease. Part of the problem is lenders are changing the way they are loaning money. This is adding to the problem because people cannot qualify for a loan. Therefore, refinancing is out of the question.

If the government stepped in homeowners could possibly see some relief. We are at a critical time in the progression of weakening real estate sales and construction of new homes. The longer it takes the government to step in the more critical the problem will be. Dunn (2008) stated “Everyday that lawmaker fail to act is a missed opportunity for improvement” (p. 11). If the Federal Home Loan Banks would increase their security holdings with Fannie Mae and Freddie Mac it would help stabilize the mortgage market.

Builders believe that they need a tax credit reform or FHA modernization that would help builder's sale homes that they built as model homes. Builders are wanting to sale to first time homeowners because first time homeowners do not have other properties that they have to sale. If the government would come out with a tax reform for new homeowners, builders