The party is officially over. This is no great surprise, and we’ve seen it coming for months. But what’s different now is that there is no longer any question that the home price downturn has begun.

At the beginning of 2005, we were in a situation where prices had been flat since the summer, inventory had risen substantially, and sales volume was down. Things didn’t look terribly promising for the market. But rates remained fairly low, and lenders tried to drive more volume by pushing non-traditional mortgage products that lowered initial monthly payments. The resulting bump in demand fed a little spring rally, and the spring of 2005 actually saw a bit of a rise in median home prices.