The mortgage crisis of 2007 marked catastrophe for millions of homeowners who suffered from foreclosure and short sales. Most of the problems involving the foreclosing of families’ homes could boil down to risky borrowing and lending. Lenders were pushed to ensure families would be eligible for a loan, when in previous years the same families would have been deemed too high-risk to obtain any kind of loan. With the increase in high-risk families obtaining loans, there was a huge increase in home buyers and subsequently a rapid increase in home prices. As a result, prices peaked and then began falling just as fast as they rose. Soon after families began to default on their mortgages forcing them either into foreclosure or short sales. Who was to blame for the risky lending and borrowing that caused the mortgage meltdown? Many might blame the company Fannie Mae and Freddie Mac, but in reality the entire system of buying and selling and free market failed home owners and the housing economy.
The house market during the Great Recession had led to many people losing their homes. Americans faced a financial disaster when they say there home values had as dropped even below the amount they had borrowed and subprime interest rates had spiked. The monthly mortgage payments almost doubled in some parts of the country. Household net worth had dropped by 18 percent more than $10 trillion causing the largest loss of wealth in the fifty
During the early 2000 's, the United States housing market experienced growth at an unprecedented rate, leading to historical highs in home ownership. This surge in home buying was the result of multiple illusory financial circumstances which reduced the apparent risk of both lending and receiving loans. However, in 2007, when the upward trend in home values could no longer continue and began to reverse itself, homeowners found themselves owing more than the value of their properties, a trend which lent itself to increased defaults and foreclosures, further reducing the value of homes in a vicious, self-perpetuating cycle. The 2008 crash of the near-$7-billion housing industry dragged down the entire U.S. economy, and by extension, the global economy, with it, therefore having a large part in triggering the global recession of 2008-2012.
Max: Hi I’m Max Lessins. This is Crash Course for economics and today we’ll be discussing the Great Recession, focusing on the fiscal and monetary policies used to recover from the 2008 economic meltdown.
The housing crisis of the late 2000s rocked the economy and changed the landscape of the real estate business for years to come. Decades of people purchasing houses unfordable houses and properties with lenient loans policies led to a collective housing bubble. When the banking system faltered and the economy wilted, interest rates were raised, mortgages increased, and people lost their jobs amidst the chaos. This all culminated in tens of thousands of American losing their houses to foreclosures and short sales, as they could no longer afford the mortgage payments on their homes. The United States entered a recession and homeownership no longer appeared to be a feasible goal as many questioned whether the country could continue to support a middle-class. Former home owners became renters and in some cases homeless as the American Dream was delayed with no foreseeable return. While the future of the economy looked bleak, conditions gradually improved. American citizens regained their jobs, the United States government bailed out the banking industry, and regulations were put in place to deter such events as the mortgage crash from ever taking place again. The path to homeowner ship has been forever altered, as loans in general are now more difficult to acquire and can be accompanied by a substantial down payment.
In the year 2000, the stock market crashed whichshifted thepeople’s money away from the stock market and into the housing market. Many people were buying homes, which led to banks offering more loans, including subprimed loans. Most loans, specifically, subprimed loans began going into default once the credit markets froze in the summer 2007. Things began to deteriorate rapidly. The offering of subprimed loans stopped completely and interest rates for other types of borrowing such as corporate loans and consumer loans rose dramatically. Since the interest rates of loans were so high, home owners were not able to afford to make payments, which caused them to be evicted from their homes. In 2013, the government introduced new laws and
The foreclosure crisis that took over the United States a few years ago left many people facing economic hardships. This crisis happened because there was a huge housing bubble that was unsupported by actual home values. The bubble began bursting in spring of 2008 and the crisis culminated in mid-2009. Many lenders went out of business and many home owners began losing their homes. When the government became aware of this problem and began to implement new programs, it was already too late for many homeowners. Those homeowners are not at a point where they might be considering buying a new home. The housing crisis has created new rules, regulations governing the mortgage industry, and has also created a new agency dedicated to consumer protection. This consumer protection agency is called the Consumer Finance Protection Bureau. These dramatic changes have helped to create more responsible lending. The improving market conditions such as low housing costs and competitive interest rates are allowing those affected by a foreclosure to become homeowners again. Prospective buyers have a multitude of programs available to them, so even those with less than clean slate have several options.
The demand for houses, along with a belief that home values would continually soar, fueled the building boom that would eventually result in our demise. Once the grace period on mortgage loans ended, and house prices began to decline, many people found themselves unable to escape the high monthly payments and began to default. Increasing foreclosures continued to lower the prices of homes, by 2008 it was estimated that 23% of all homes were worth less than their mortgages. 2.9 million vacant homes later, it is safe to say the consequences of short-sighted expenditures were severe. Since then, more than 6 million Americans have lost their homes to foreclosure. Much of the blame for the housing crisis can be traced back to rumor in the stock market. While homes are not typically viewed as investments under speculation, statistics show that this was not the case during the mortgage crisis. 22% of homes purchased in 2006 were for investment purposes.
In the course American Global Context taught at Mount St. Mary’s University, eight significant historical events from 1898 to contemporary times are covered. These events range from the assassination of William McKinley to the Great Depression to Pearl Harbor. One of these events, the 9/11 terrorist attacks, occurred in the 21st century. If I had the ability to add another event that possesses historical significance it would also be from the 21st century. The Great Recession of 2008 is the event that I would pick as the ninth historical event. By looking at the details of what happened, what the recession revealed about America, and what changed as a result it is possible to understand the immense significance of the recession.
Anyone that was living in America, or even watching from abroad, knows that in 2008 America had a huge collapse of the housing market. Homes were foreclosed on in record numbers causing the real estate balloon to burst. But the collapse did not happen overnight and in many ways was destined to happen. According to Investopedia.com in order to attract buyers and sell houses, mortgages were offered to less than qualified applicants. Then just a few years before the collapse subprime mortgages made up 20% of the market. (Investopedia.com) Factors such as the 1993 passage of the North American Free Trade Agreement (NAFTA) and the 9-11 terrorist attacks led to an increase in unemployment. With unemployment numbers climbing many homeowners
The US population is beginning to see a significant growth in the proportion of Americans who are 65 and older. In 2011 the first of the baby boomers began entering the age of 65. The last of the baby boomers will turn 65 in 2030, and it is projected that one in every five Americans will be elderly at that time (Centers for Disease Control and Prevention, 2013; Ortman, Velkoff & Hogan, 2014). Also adding to the reason for the increase in proportion of aging individuals in the population is the declines in fertility and the dramatic increases in longevity, which means the number of generations of a family alive at one time has continued to increase. At each stage of the life the post war baby boomers, because of the sheer size of the group,
The fall of the housing market that begins the recession in 2008 was in large part due to the fact that people wanted large and expensive homes. These were homes that they could not afford. Real-estate agents and their loan officers help manipulate the numbers for these unfortunate individual to get bank loans from banks who would later foreclose on these homes. As the job market begin to decline and massive layoffs resulted all across the country. Many individuals became delinquent on more than one or more house payments after losing their employment. Mortgage companies Lenders Country wide and Fannie Mac and others found themselves holding a massive amount of risky home loans that could have ultimately collapsed the world banking system.
Everybody in the United Stated was affected by the recession that began in December of 2007 and spanned all the way to June 2009. Even though the recession is over, many people are still being affected by it and have still not been able to recover from the great recession. “The recent recession features the largest decline in output, consumption, and investment, and the largest increase in unemployment, of any post-war recession”. Many people lost their jobs due to the recession and some of them are still having a hard time finding jobs and getting back on their feet. Businesses
In 2008, an absolute indication of a recession was the decline in auto buying, insurance companies requiring assistance, retail stores closing with massive lay-offs stemming from these markets. As a result, these individuals now unemployed were unable to pay their monthly mortgage payments which resulted in home foreclosures. A foreclosure is legal proceeding that bars or extinguishes a mortgagor’s right of redeeming a mortgaged estate (“foreclosure“, n.d.). In New Jersey, the statewide foreclosure rate is 0.03% and the unemployment rate is 9.7% resulting from the loss of 179,400 high paying jobs that were replaced by lower paying jobs (Mackenzie, 2009, p. 1). It is clearly evident that the crisis of home foreclosure throughout the
With all of the incentives and mortgage products given so easily to people that couldn’t afford the high prices (including interest rates), many people defaulted on their first mortgages because they were no longer were able to receive the profit from the homes they first intended to flip. “During the first quarter of 2008, nearly 9% of all mortgage holders were delinquent or in foreclosure, the highest rate since recordkeeping began in 1979. Foreclosure filings more than