The Impact Of U.s. Economy On The Housing Crisis

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 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.

During 1997-2006, house prices rose 85 percent. This led to an irresponsible consumer spending spree. Millions of people bought a house that they could not afford. Government regulatory agencies and mortgage lenders became less strict with credit restrictions so that people could buy homes without making any down payment. In 2007, however, the home values and sales began to decline. Due to the loss of trillions of dollars in home value, a record number of borrowers defaulted on their mortgage payments. America was put into a recession in 2008 because of the contraction of corporate spending and consumer purchased. The prices of consumer goods spiked, while employment declined. On October 3, 2008, former President Bush signed the Troubled Asset Relief Program; however, the bill did not restore the economy as a whole. By June 2009, America's economic recovery was at its weakest since the end of the Second World War. I chose this event in history because it had a major effect on America’s economy and changed the course of history. Historians need to study the Great Recession because America should learn from their mistakes. The Great Recession was due to different factors; however, if the regulations on credit restrictions were not tampered with, then the severity of the recession could have been

The U.S. government borrows large sums of money in times of national emergency, such as times of war. The U.S. entered many wars that greatly contributed to the national debt. The government also engaged in multiple social programs that increased the debt, such as the bailouts during the housing crisis in 2008-2009. To keep the economy from collapsing, the government borrowed enormous amounts of money. Half way through this housing crisis the deficit exceeded one trillion dollars. The deficit decreased to under $500 billion after the massive spending cuts deal in 2011.

The recession of 2008, which we are only just starting to come out of, happened as a result of a few major factors. The primary factor was the deregulation of banks during the Bush administration. Another factor was that banks offered loans without looking into the financial stability of borrowers or businesses. Also, credit unions, savings and loans, and banks entered into competition with each other. The Security and Exchange Commission, S.E.C., reduced requirements so that banks could pile up debts.

The United States will always recall autumn of 2008 as a time of financial terror, and rightly so. After the stock market crash, millions of Americans, previously unaware of the brewing crisis, lost their businesses, their jobs, and their homes. Even now, we still are in a period of recovery from the economic turmoil of that year.

It is necessary to first explain what Thomas Sowell an economics scholar says “The cast of characters” (Sowell 2). The nature of the housing market makeup is much more than just a bank issuing loans. The importance is to understand what lies behind the scene and from there comprehend the causes of the housing crisis. The Federal Reserve System in general regulates banks across the county. The Federal Reserve also has power to “take action which affect interest rates and the money supply” (Sowell 2). The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation are “two government-created, but privately owned, profit-making enterprises that buy mortgages from banks” (Sowell 3). The Federal National Mortgage Association is also known as Fannie Mae, and the Federal Home Loan Mortgage Corporation is also known as Freddie Mac. These Associations as stated above buy loans from banks, which ultimately eliminates the banks wait for 30 years of monthly payments. According to book The Housing Boom and Bust “Fannie Mae and Freddie Mac purchased more than one-third of all the mortgages in the nation that were resold by the original lenders.” The U.S. Department of Housing and Urban Development is another major entity in the real estate housing market. The U.S. Department of Housing and Urban Development is also known as (HUD) and “exercises authority over Fannie Mae and Freddie Mac,

Similarly, the Great Recession was due to consumer spending cutbacks and a drop in demand for the establishment of new housing. In the two decades previous to 2008, the American growth rate was very high. Their household needs also became very high, which made demand increase. Spending was at a high. However personal income was decreased. The consumers then had to borrow money from the banks. This gave the consumers debt. So, when the house prices rose, banks stopped loaning money to people and the people decreased their spending. This happened because the people were not able to pay the banks back. People also cut back on buying or making new houses, so household demand dropped. Many say that this decrease caused the Great Recession. Housing was one of the main subjects that many believe, caused the Great Recession. “Subprime” mortgage availability and low interest

The “Great Recession of 2008" hit The United States and the rest of the world with a force not seen since the Great Depression less than a century ago. December of 2007 saw an unemployment rate of 5.7% as the economy was rolling forward on the back of the high-profiled housing market funded by aggressive loans to consumers with sub-par credit. (National Bureau of Economic Research) This created a proverbial “House of Cards” that fell apart that same month and over the course of two years; the unemployment rate would nearly double as The United States would lose over 8 million jobs according the National Bureau of Economics. The cause of The Great Recession can’t simply be quantified to just one person, agency or company. However, in the broad

After the bursting of the United States housing bubble, many homeowners found themselves in a dire situation. Following the dot-com bubble burst, the Federal Reserve slashed interest rates, meaning credit was cheap. Lower lending standards also meant that consumers with not-so-great credit were suddenly able to attain adjustable rate mortgages with a minimum of money down and easy initial terms. In 2004, approaching the pinnacle of the housing market’s climb, former Federal Reserve Chairman, Alan Greenspan, actually encouraged Americans to take out adjustable rate mortgages. Then, as 2006 came, Americans saw the housing market reach its peak and subsequently plummet downward. As a result, it became difficult to impossible forthe borrowers

The housing crisis in the late 2000’s was created in part from subprime loans that lenders gave to individuals that did not have to provide proof of income that they could afford the house. This was a disaster likely to repeat itself. If a person is hoping to buy a home, they will buy whatever the lender allows them to purchase even though it could be a financial stretch. Lenders, builders, sellers, appraisers, buyers, owners, and governmental policy makers are all still gambling with the economic future of both their buyers and the American economy as a whole.

In 2008, the US economy entered a period known as the Great Recession. This was primarily the result of banks granting housing loans too freely and at variable rates. When the rates rose too high for the home owner to pay, they forfeited. Then the banks had unpaid loans and houses that they could not sell. This resulted in a chain of events that impacted the banking, insurance and investment industries. The decline in construction and spending resulted in an increase in the unemployment rate to as high as 10% in 2009. This period of Recession was the worst since the Great Depression of the 1920s and 1930s. (Great Recession in the United States. (2011, September 11). In Wikipedia, Retrieved June 20, 2016, from https://en.wikipedia.org/wiki/Great_Recession_in_the_United_States)

The Great recession occurred in America in 2007 when the economy began to decline. The cause of the recession can be contributed to many different sources, but it is clear that the main causes of the recession were deregulation, the “housing bubble”, corruption of “gatekeepers”, derivatives, the strategies of K street markets, and private debt.

Several years ago, many of us could not imagine mortgage meltdown ending. It seemed as if the foreclosures/short sales were increasing and the American dream of buying a home was decreasing. Many people felt hopeless and cheated when it came to the economy’s poor status due to the housing crash. Many lessons were learned from the collapse and although it may seem hard to believe, there were silver linings in the mistakes made during the mortgage meltdown. Today, real estate buyers are benefiting from the past mistakes and have more confidence in their home buying purchases.

The causes of this recession was due to the unemployment being too high and how it had rose even higher through the years. The unemployment rate was at 4.9% by the fourth quarter and rose significantly at 8.3% by the fourth quarter of