The Real Estate Market Crash

1525 Words7 Pages
During the real estate market crash in 2007-2009 more than 8.5million people lost their homes as a result of foreclosure. Some of these home foreclosures were the result of the typical reasons that people often lose their homes such as illness, divorce, poor money management, death of a spouse, or legal issues. However, during the real estate crash of the last decade most foreclosures were the result of some circumstances that were unique to that time. The national unemployment rate soared during this time, peaking in 2008, where more than 1/10 people were unemployed. The economic recession that preceded the real estate crash put others in financial distress as stocks lost value and investments were not providing the previous returns to which investors had become accustomed. The real estate boom of the early 1990s (that preceded the crash) saw home prices soar, but when housing prices dropped significantly during 2007-2009buyers were unable to make enough to pay back original loans (being underwater on a loan). These loses that people faced were caused by predatory lending practices, such as interest only loans in which lenders made their profit from the buyersbefore the buyers accrued any equity.As unemployment rose, many people did not have the finances to pay for their homes which lead them to foreclosure,leaving them infinancial ruin. By the end of 2009, these people’s credit had been damaged (making it tough to obtain future loans) and they were scared to make
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