During the past 15 years, the U.S. housing market cycled from a boom to a bust. In the late 1990s, it entered a period of dramatic expansion. Home sales, new home construction and mortgage lending reached record levels with each passing year. First-time homeownership boomed, and homeownership rates rose for households across all income levels. Housing prices increased at a remarkable rate, peaking in mid-2006. However, following this rapid run-up, the housing market entered a period of equally sharp decline. Most tellingly, the median home price in the United States declined by 21 percent in the two-and-a-half years following the 2006 peak (Figure. This decline sent shockwaves through the rest of the economy. The median decline of 21 percent across the nation masks vast disparities across cities and regions. Las Vegas, Miami and Phoenix to name a few of the most dramatic examples — experienced declines that far outpaced national averages.

Meanwhile, other important economic indicators followed similarly alarming patterns. For example, unemployment spiked from 4.1 percent in 2006 to 9.6 percent by 2010.1 Although state- and regional-level trends vary significantly across the country, the general trend has been a nationwide recession with a decline in home values and homeownership rates. The housing market’s downward spiral appears to have stabilized, but mortgage foreclosure rates remain well above historic levels. The Mortgage Bankers Association National Delinquency Survey data show that 4.63 percent of all mortgages were at some stage of the foreclosure process at the end of 2010, which ties the all-time record documented by the survey.2 Given these grim figures, many observers have thought about what can be done to help homeowners, especially first-time homeowners, become successful and stable mortgage borrowers. HEC programs have been promoted as a mechanism for addressing the current housing crisis and for stabilizing the housing market in the future.