The Demand For Housing Changed Drastically

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.

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.

The Great Recession of 2007-2009 was one of the most economically disastrous events in American history. The housing market took a significant downturn during this period. People were not cautious when it came to their money and loans. Larger loans were given out to people, even to those with bad credit and low incomes. These large loans caused many homes to go through foreclosure since people were unable to pay off their mortgage debts. These debts were created by banks increasing the interest rates on the loans significantly in a short period. In 2008, foreclosures were up by eighty-two percent. This increase is significant because the previous percentage of foreclosures was at fifty-one percent from 2007. Unemployment skyrocketed, and people

The bursting of the housing bubble, known more colloquially as the 2008 mortgage crisis, was preceded by a series of ill-fated circumstances that culminated in what has been considered to be the worst financial downfall since the Great Depression. After experiencing a near-unprecedented increase in housing prices from January 2002 until mid-2006, a phenomenon that was steadily fed by unregulated mortgage practices, the market steadily declined and the prior housing boom subsided as well. When housing prices dropped to about 25 percent below the peak level achieved in 2006 toward the close of 2008, liquidity and capital disappeared from the market.

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.

Subprime lending became prevalent in the early 2000’s when property values were sky-rocketing and many Americans thought they would fulfill their home ownership dreams, by obtaining loans they may not otherwise qualify for. A subprime loan is a loan offered to an individual who does not qualify for a loan at the prime rate due to their credit history. Subprime loans have higher interest rates because of the risk that the lender is taking. During the early 2000’s the housing market was great for homebuyers, since interest rates where low and property values

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

On February 7, 2015 the International Business Times ran a story about how China’s housing market makes home ownership elusive for young buyers and renters. In said article, readers are introduced to Shen Lu, a recent college graduate, whose rent eats away at half of her salary every month (FlorCruz). This short anecdote applies to many low and middle income individuals within China’s big cities today. This paper will uncover why this is the case and how it may be resolved.

The issue with the housing market began around the year 2000. This was also known as the start of the Real Estate Boom. Banks started to handout subprime loans, also known as junk loans with super high interest rates (Lewis). Normally, lower income families would not be able to receive

effectively encouraged frivolous spending and heavy borrowing allowing people to live beyond their means. Low interest rates also increased the discount value of assets and therefore increased their value. This created a house price boom in the UK and US. It was in the US that this twined with high levels of borrowing created the subprime lending market, whereby individuals with poor or no credit history borrowed vast subs of money to buy

The problem was everyone who qualified for a mortgage already had one. Lenders knew if they sold a mortgage to a person that defaults the lender gets the house, and houses were always increasing in value in that market, that would be a valuable asset to sell. To keep up with the demand from investors, lenders started selling mortgages to borrowers who wouldn’t have qualified before because of the risk for default. These mortgages are called sub-prime mortgages and lenders started creating tons of them. In the unregulated market, lenders employed predatory tactics to get more borrowers with attractive offers such as no money down, no credit history required, even no proof of income. People never would have qualified before were now buying large houses, and the lenders sold their mortgages to Investment bankers. The investors packed subprime mortgages in with prime mortgages so credit agencies would still give a AAA rating. The rating Agencies who had a conflict of interest by receiving payments from the investment banks, had no liability if their credit ratings were correct or not. They turned a blind eye to the risky CDOs and kept giving AAA ratings. This worked for a while and everyone was happy including the new homeowners. The housing market became hyper inflated with more homeowners than ever. Wall Street continued to sell their CDO’s which were ticking time bombs. The subprime mortgages began

The housing market crash, which broke out in the United States in 2007, was caused by high risk subprime mortgages. The subprime mortgage crisis resulted in a sudden reduction in money and credit availability from banks and other lending institutions, which was referred to as a “credit crunch.” The “credit crunch” and its effect spread across the United States and further on to other countries across the world. The “credit crunch” caused a collapse in the housing markets, stock markets and major financial institutions across the globe.

The U.S. subprime mortgage crisis was a set of events that led to the 2008 financial crisis, characterized by a rise in subprime mortgage defaults and foreclosures. This paper seeks to explain the causes of the U.S. subprime mortgage crisis and how this has led to a generalized credit crisis in other financial sectors that ultimately affects the real economy. In recent decades, financial industry has developed quickly and various financial innovation techniques have been abused widely, which is the main cause of this international financial crisis. In addition, deregulation, loose monetary policies of the Federal Reserve, shadow banking system also play

One of the first indications of the late 2000 financial crisis that led to downward spiral known as the “Recession” was the subprime mortgages; known as the “mortgage mess”. A few years earlier the substantial boom of the housing market led to the uprising of mortgage loans. Because interest rates were low, investors took advantage of the low rates to buy homes that they could in return ‘flip’ (reselling) and homeowners bought homes that they typically wouldn’t have been able to afford. High interest rates usually keep people from borrowing money because it limits the amount available to use for an investment. But the creation of the subprime mortgage

An increase in loan packaging, marketing and incentives encouraged borrowers to undertake difficult mortgages so they believed that they would be able to refinance quickly at more favourable terms. People borrowed money to buy the house and then expected the price to rise and sold so that they could pay off the debt which owed to the bank and demanded a new loan to buy another house. However, once the interest rate began to rise and house’s price dropped in 2007, refinancing became more difficult and banks could not collect their mortgages.