Housing Market Crash Research Paper

There are a numerical amount of variables that happened that caused the housing market to collapse. But if you were to ask any “average Joe” that lived through the market collapse, he would most likely point out that subprime loans and changing interests rates caused the failure. Even though this answer is common, it’s not completely accurate. Subprime loans and changing interests rates was not the sole driver of the market failure because the market is not driven by itself, people work in the market that have there own set of agenda that were driven by greed. This comes to my first causes of the housing bubble, Bad people and bad policies.

The sounds of elation by all sides of the business are what everyone involved in the post housing market crash is saying these days. The age of the foreclosure and short sale (“when a house on the market is worth less than the seller still owes for it”) is slowly coming to an end as buyers and lenders are more aware of the changing factors in today’s real estate market (Momberger). The previous method that lenders used helped cause the housing crash and a higher level of home loan defaults. Before the housing crash many buyers entered their housing purchase having some debt and often would refinance to pay off debts and use the increasing value of the house they purchased to pay them off. The new ways of qualifying buyers and assessing a homes

Well how did the Housing crisis happen in the first place? Well what banks were doing was looking for fast short term profits. To get these profits banks had to give out “sub-prime mortgages”. Sub prime mortgages are basically loans given to people who would have a rather hard time paying back the cash. Because of this banks were able to increase interest rates. When the banks raised the interest rates what they did was create a hypothetical bubble that was bound to burst. When this happened banks began to fail.

Ask anyone about the 2007-09 recession in the United States, and they will be able to tell you they know what it was. The reason why there was such a Great Recession, the second to biggest following the Great Depression, was because of the market failure in 2006-07 due to the real estate and mortgage sectors. The lost of wealth in the real estate sector led to a cutback in consumer spending. After years of economic recovery, citizens and residents are coming back to the market. But even then, the market is only slowly growing, mainly because of fear of having another market failure. Looking back, there are many lessons we have learned from the collapse that we must apply to the present and future market, and every mistake allows room for benefits.

The collapse of the housing market had far and wide ranging effects in the economy of the United States. While the effects were felt throughout the country, California, Florida, New York, Michigan, Illinois were dealt devastating blows to their respective economy. Throughout the country, foreclosures rose to staggering numbers and jobs lost were in the millions. This research paper will concentrate on the causes and consequences of the housing crisis and will attempt to determine if there is any fault for not controlling the crisis.

The housing crisis is not random, but is the deliberate result of the social and structural institutions that create neighborhood racial inequalities. Discriminatory and unfair housing policies have existed for generations, but have recently taken shape in the form of the new Jim Crow which relies on law and order regulation to create new forms of discrimination in housing, education, and employment. This regulated discrimination can be seen through the recent surge in sub-prime mortgage lending that targeted inner-city and marginalized communities. To challenge the housing crisis, policymakers must answer the question of whether they are willing to take a stance and create an infrastructure that challenges discrimination and advocates for

In 2007 the worst housing market crash in U.S. history took place. Foreclosures and housing-related bankruptcies surged significantly. This ultimately caused the financial crisis the next year which nearly caused the United Sates to go into another great depression. So how did this housing bubble occur and what happened that caused the bubble to collapse?

What is the housing economy today? According to the National Association of Realtors, pending home sales improved slightly in April and continues to be well above a year ago. There are reports of bidding wars on some properties in neighborhoods where few homes are on the market. Some are even working there through the inventory of homes that were foreclosed on during the housing crisis. But there are many whom this is not reality. CoreLogic reports that 4.4 million foreclosures have been completed since 2008, the start of the Great Recession. In April, some 52,000 foreclosures were completed, a drop of 16 percent from March. Still, that’s twice as many foreclosures as in a normal housing market.

Life was once a happy song. The nice ladies with the clacking heals and the smoking sticks sang. Fats, Armstrong, and Gershwin jazzed through the new radio we had; me playing along with my trumpet. The sizzle of mother’s pan whistled in the kitchen. The thumping of Billy and Dick’s feet running up the apartment stairs added bass. The Kid featuring Charles Chaplin played in father’s theater, and the cackling of the audience echoed along it. Even the small coughs of Izzy drummed quietly in the band of joyous life. With a loud crash, though, the melody of life we had before was taken from me almost abruptly by the Great Depression.

According to Evidensgruppen (2013), what signifies a housing bubble is when housing prices increase considerably during a period of time until it collapses and the price falls. Throughout a housing bubble, we can see that house prices have no relationship with factors that usually matter such as income tax, interest rate and unemployment. The sudden price escalation creates expectations among consumers that prices will continue to rise. This creates an enthusiasm to invest in properties because people think that they can buy a house and then make a profit on it when they later sell it. But if the housing prices do not increase as expected, people have a huge loan that they cannot afford to pay back which leads to a financial crisis. When scientists

Novice inexperienced investors with no exit strategy equals a lot of foreclosures. While this was absolutely devastating for all of these people, the more experienced and savvy investors, who bought things they could afford, turned their inventory in to rentals. It took some time for the banks to foreclose but when they did, all the people with trashed credit scores and no money saved up had to live somewhere. Since buying was out of the question, all these people had to rent. The market has made a recovery and home values went back up but a lot of the overnight investors still have trashed credit history and no wealth built up and still they cannot buy houses to live in. They must continue to rent and the investors who were able to make it through the crash will continue to make money and build wealth through the properties that they were able to hold and rent. The rental market is huge here in South Florida. Hedge funds are able to pay more than the average investor who wants to fix and flip because the exit strategy is different for them. They are focused on long term capital gains instead of a 3-6 month turn around. Some of the people who were negatively impacted by the crash may never be able to buy again; those people

For these families who were first time home buyers, these details are very easy to miss. People were arrogant and thought that no matter their income or their ability to make a down payment, they could own a house. For the mortgage lenders, they wanted money and so they would often sell these mortgages to a bank or to Fannie Mae or Freddie Mac, which were institutions created to buy mortgages and provide lenders with more money to lend. The great part about this is if the housing prices keep rising, everyone profited. Unfortunately that did not last long. When the economic bubble of the housing boom burst. One by one, the mortgage holders defaulted on their loans. This caused 76% of home loans to be in the process of foreclosing in just a year. Another 7% had their payments one month past due. This is what cause the housing market threat.

But what caused this Housing market threat? First, The Subprime mortgages, It starts off with greedy mortgage dealers who set the terms that are unfair to the people who desire to obtain the mortgage loan. These people were often families who were not even qualified for an ordinary home loan. Even though, these subprime mortgages offered low interest rate in the beginning, later on that would increase to double digit rates in later years. This was called teasers. The mortgage

The United States housing market peaked in 2006 but started a decline in 2007. The market hit all new lows in 2012. The mortgage debt was higher than the actual value of the property. Consequently, a large amount of home owners were incapable of paying their mortgages when their original low introductory rate mortgage went back to being regular interest rates. The effects of the mortgage collapse had hugely impacted on the economy in a negative way. It is important to look at the past mistakes our country has made so that they are not repeated. What has the country learned from the housing crisis?

The housing market crash of 2007 to 2009 is said to be one of the main reasons for the housing market crash. The crisis occurred when homeowners were not able to make payments on their mortgage. Homeowners were unable to keep up with payments when low introductory rates converted to regular rates. Real estate property began to lose its value, leaving many homeowners with a negative equity. Soon after the housing bubble the government took over (two GSEs) Fannie Mae and Freddie Mac, in order to prevent the financial crisis from getting any worse In the most recent FSOC annual report, the council reported that significant efforts have been made to improve the housing market and reduce taxpayer risks. However, market growth has been slow,