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The U.S. housing market expanded dramatically in recent years, and new records for home sales, single-family starts and residential remodeling were set in 2005. Prices of single-family homes and condo units soared in the process, posting double-digit gains on a national average basis.

Affordability issues created by the combination of soaring house prices and a rising interest rate structure began to weaken housing demand to some degree in the latter part of 2005. Sales of new and existing homes have moved down modestly from recent peaks, and both housing starts and building permits have started to fade. Forward-looking surveys of single-family builders and home mortgage lenders suggest that the cooling process extended through the end of 2005 and into 2006.

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