Economic Analysis On Economic Growth

The housing crisis of 2008 can trace its origins back to the stock market trends of the mid- to late 90 's. During a period of extended growth in the stock market, increased individual wealth among investors led to generalized increases in spending, including in the housing market. With more disposable income in the pockets of consumers, the demand for housing increased in the late 90 's. Due to the fact that homes are large projects and their construction takes a large amount of time, the supply of homes in the market is inelastic on the short term. Because of the fixed supply of homes, as per the law of supply, which

since there is a shortage of houses there is a rush to try and build more and a not much of an incentive to maintain properties. So, the quality of housing will start going down.

The increasing homeownership rate in the United States is a worthwhile policy goal. The housing economy creates jobs for American citizens as well as brings down the competitive qualities to purchasing a home allowing more middleclass citizens to spend money on houses. In doing so this drives the overall economy up in the United States.

After World War II, society experienced many changes due to economic growth. The reason for the rise in the economy is "… the developments in technology, methods of production, communication, and transportation..." (Background; lines 1-2). These changes "… led to far more goods and services for many people..." (Background; Lines 10-11).

Meanwhile, yearly house price inflation rates in the top 20 cities are running in line with the national trend. The cities with the highest rates of increase are Seattle (+12%), Portland (+10%) and Dallas (+9%). Lower tier property prices appear to be more volatile than their high end counterparts in both Seattle and Portland. Meanwhile, the three cities with the lowest rates of house price inflation are New York (+3%), Washington (+4%) and Cleveland (+5%). Furthermore, rising house prices appear to be having an adverse impact on affordability. According to the National Association of Realtors, rising prices are offsetting higher disposable incomes and stable mortgage rates, and affordability has consequently been declining since January 2015. Partly driving the increase in prices is a lack of available supply of existing single family homes for sale. The number of months’ of unsold inventory was just below 4 in March and availability has been gradually falling since 2014. Additionally, there is a relatively tight supply situation for new single family homes for sale, which is also helping to support prices.

The increase in population caused a spike in housing demand, resulting in a rapid increase in property prices. When property prices are high, people will turn to rental, instead of mortgaging, as it is more affordable.

Economics growth is, it the short run an increase in real GDP and in the long run an increase in the productive capacity of an economy (the maximum output that the economy can produce). GDP stands for Gross Domestic Product which is the country’s production of goods and services valued at market price in a given time period. Real GDP is when these figures are corrected for inflation using a base year (The UK uses 2003 as its base year). It can be measured in three different ways; the output measure is the value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy, construction, the service sector and government. The

Poverty is a major contributing factor despite improvements in Saskatchewan’s economy, there is a growing gap between the rich and the poor. Areas with high poverty rates exist in Saskatoon. Statistics from the Regina Food Bank in 2010 concerning poverty in Saskatchewan reported that Saskatchewan’s overall poverty rate is 15.3% — affecting 140,000 people, Saskatchewan has the third highest provincial child poverty rate in Canada17.

6.3 TRILLION DOLLARS! This is how much the value of homes have fallen in the United States since its real estate peak back in July of 2006. After the price of houses peaked in 2006, they gradually started to decline until December 30th, 2008. This is when the Case-Shiller home price index which measured the value of homes, reported its largest price decrease in its entire history. From there we saw prices continue to decline until we hit all-time lows in 2012. The United States housing bubble burst will be talked about for years to come including many what caused it and how to prevent such occurrences in the future. Low interest rates, Housing bubble, subprime mortgages, as well as securitization all contributed to the housing market crash of 2008 and will all be explained in this paper. According to the general consensus, most people believe that the housing bubble was the main cause of the 2007-2009 economic recession in the United States of America.

Housing demand includes household growth, real incomes, real wealth, tax concessions to both owner-occupied and rental housing, concessions to first homebuyers, returns on alternative investments, cost and availability of finance for housing and the institutional structure affecting housing finance provision (Yates, 2008). The growth in the number of households and in real income results in the increased pressure on housing demand.

Around 2006 the price of houses began to fall substantially fast. “The oversupply of houses and lack of buyers pushed the house prices down until they really plunged in the late 2006 and early 2007” (The Subprime Mortgage Crisis Explained). These actions threw investors into a big dilemma. In the beginning they believed buying the mortgages would bring them a profit, but quickly realized that the mortgages would cost them more financial damage than reselling the homes. “Nationwide, home vales have declined about 16% since the summer of 2006 and experts project that the drop will continue until homes have lost about 25% of their value” (Biroonak, 2008). In other words mortgage homes are “underwater”, that is, the mortgage owed equals or exceeds the value of the house (Biroonak, 2008). Investors and homeowners started to go more in debt trying to pay off their original debts.

Interest rates have a major economic impact on the real estate market. Interest rates directly affect property sales. Residential property realizes the greatest affect as interest rates have a considerable influence on a homebuyer’s capability to purchase a new property. The customer is affected when there are significant increases or decreases in interest rates. Declining interest rates lower the costs of obtaining a mortgage; this in turn creates higher demand for homes, and pushes home prices up. Conversely, high interest rates increase the costs to obtain a mortgage; these increases lower the demand for homes, which creates a decline in home prices. (Stammers, 2016)

Declining price attract people with the easy loan facilities of their banks. And banks are ready with very high risk loans. This excess supply of home inventory placed significant downward pressure on prices. As prices declined, more homeowners were at risk of default and foreclosure. According to the S&P/Case-Shiller price index, by November 2007, average U.S. housing prices had fallen approximately 8% from their Q2 2006 peak and by May 2008 they had fallen 18.4%. The price decline in December 2007 versus the year-ago period was 10.4% and for May 2008 it was 15.8%. Housing prices are expected to continue declining until this inventory of surplus homes (excess supply) is reduced to more typical levels.

Economic growth is a necessary but not sufficient condition of economic development. There is no single definition that encompasses all the aspects of economic development. The most comprehensive definition perhaps of economic development is the one given by Todaro: ‘Development is not purely an economic phenomenon but rather a multi – dimensional process involving reorganization and re orientation of the entire economic and social system. Development is a process of improving the quality of all human lives with three equally important aspects. These are: 1.

Economic growth refers to the rate of increase in the total production of goods and services within an economy. Economic growth increases the productivity capacity of an economy, thereby allowing more wants to be satisfied. A growing economy increases employment opportunities, stimulates business enterprise and innovation. A sustained economic growth is fundamental to any nation wishing to raise its standard of living and provide a greater well being for all. Gross domestic product (GDP) is the monetary value of all final goods and services produced over a year. It is the total value of production within the economy. The total value of production is the total value of the final goods or services less the cost of