Housing Boom Monetary Policy

As the economy expected to slowly recover, and provide to support to the largest aspect of our economy, the housing market. The General

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

Where there is darkness there is ultimately light and the various homeownership opportunities under the current economy reflect this notion. Real estate prices

With the consistent increase of property prices and more personal debt than ever before, we assume that there’s a housing bubble in Australia. The statistics show that from 2008 till now, property prices have been going up as a result of increased mortgage debt. When it slows down, that could cause a property crash. We are sure that there’s a housing bubble, but we cannot confirm when it will finally burst although a few area in Australia has already met a decrease of house prices. There are 3 indicators of the housing bubble in Australia.

New home sales and inventory have reached trough levels and can only go higher from there. This implies that residential construction will transition from a drag on GDP growth to a modest benefit for the foreseeable future.

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The housing industry has been around for many years. It is an important industry and one that will always have a necessity to exist since it creates a product that is one of the essentials of human life, housing. Economics play an important role in the housing industry along with all other industries.

Macroeconomics is an excellent tool for the analysis of the housing industry as something like a capital good, as a home is considered to be, cannot easily be studied in a short-term platform. Real estate is a good that costs several times more than an average persons annual income, in the United States that number is typically 7 times as much, and in the United Kingdom that number is 14 times as much. Several factors of both supply and demand directly impact the housing market on a macroeconomic scale. (Business Economics, 1)

Nick Vertucci, a real estate expert, has spent years educating himself about the housing industry. He predicts that a tipping point

When researching past economic recoveries, the housing market is the one to drive the economy out of recession. That being said, this economic recession hasn’t had much of an impact until recently. America’s housing boom had a tremendous influence on the economy for its low prices and flow of new home construction.

Since last year, lending for multifamily properties has increased by 8 percent. This record-setting year happened because of a growing marketplace and increased demand. While markets generally have boom and bust cycles, the Boston multifamily

According to Wikipedia a housing bubble is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline. Four years into the housing bubble downturn, much of the country remains hopelessly confused about what happened, why it happened and who is to blame. In my research paper I will try and demonstrate what a housing bubble is, some of the reasons for the bubble, was it preventable, how it kept growing, how it burst and how it has affected our economy.

Besides, low interest rates and large inflows of foreign funds created easy credit conditions for years before the crisis and that simulated the boom in housing construction (Steverman and Bogoslaw, 2008). Moreover, easy credit and money inflow greatly contributed to U.S housing bubble and the rise of house’s price.

In the period of 2000-2007, it is estimated that banks created over £1 trillion through their issuance of loans to borrowers prior to the crisis (Positive Money, 2014). Consequently, the impact of such a credit expansion caused real assets, such as house prices, to increase as a result of the increased demand. Similarly, through the same mechanism, an expansion of credit also caused increases in the values of securities tied to U.S real estate (i.e. mortgage-backed securities), as investors believed that house prices would continue to rise. Furthermore, one might postulate that changes in economic variables, such as the money supply or rate of inflation,

In 2008-2009, the economy financial crisis has been affected in many countries with a rapidly decreasing in housing prices, follow by a protracted real estate boom. This has created an interest in the relationship between monetary policy and asset price, and it became a huge debate on how monetary policy should react to discern deviations of asset price developments. Even before the financial crisis in 2008-2009 happened there also has been a gigantic debate whether or not central bank should react and counter to the asset price developments. Proponents of a “leaning against” begin to argue that the central bank is able to prevent limit of asset price increases (Blanchard 2000, Bordo and Jeanne 2002, Borio and Lowe 2002,