The Burst Of The Housing Bubble

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Imagine starting off with a young family, relatively average income and a dream to own a home meant for the magazines. This dream became a reality in the new millennium when interest rates in the United States were at an all time low. Suddenly that colonial style home, with the white picket fence was just at the tips of consumers’ fingertips. Mortgages were being handed out as if they were an everyday commodity with minimal screening, therefore the American dream eventually faulted and came back down to a shaky reality. After housing prices in the United States skyrocketed, Americans and foreign investors alike rode the benefits. However, most parties involved did not anticipate the impending bubble and could not have foreseen the outcomes of its sudden burst. The burst of the housing bubble contributed to a financial crisis and recession. It was one of the worst economic downturns since the Great Depression and affected many sectors of the economy. Several factors such as government policy, brokerage incentives, and securitization all played key roles in the bubble’s burst. A better understanding of the housing bubble is achieved through analyzing it, a comparison with that of Canada, and the effects of the financial crisis throughout the world. Political Environment in America Community Reinvestment Act In 1977 the American government initiated the Community Reinvestment Act (CRA), a program that encouraged home ownership for lower-income communities in the United

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