The Real Estate Market Crash

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.

In the United States, the lending industry’s lack of aggressive monitoring was a big part of the housing market crash of 2006. The Las Vegas housing market, once a booming industry in 2003 to 2005, is now one of the top 3 cities in foreclosure properties. I sat with Suzanne Pashnick to get her take on what happened, who is to be blamed and what can be done for the city to recover. Suzanne has been in the real estate field since 1995 and began her career in Michigan. In 2005, she moved to Las Vegas and continued her career in real estate and is currently an agent for CENTURY 21 MoneyWorld and remains licensed in Nevada.

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

When the real estate market hit rock bottom, trust was broken between the lenders and

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

The recession of 2008 is also called the ‘Great Recession’, said to have begun in December 2007, and took a turn for the worse in September 2008, and it was a severe economic problem expanded globally. This recession affected the world economy, and is said to have been the worst financial disaster since the Great Depression. The decline in the Dow Jones this time was -53.8%. Since the official start of the recession in December 2007, and through June 2010 there have been about 2.3 million homes foreclosed in the United States. In 2012, the state with the most foreclosures in January alone was California, with 51,584 houses being repossessed. Unemployment during this collapse was 8.5%, and continued to increase to about 10% as of 2010. People’s reaction to this recession was a huge decrease in spending and borrowing from banks, but an increase in saving.

Many people lost their homes and other assets due to foreclosure and lack of payments on their loans when the stock market crashed and housing industry fell. Immigrants where a large percentage of those who became victims to the crisis, because many lenders were making it very easy for illegal immigrants to obtain loans and mortgages by not requiring them to provide much documentation. It was found that the loan sharks that participated in fraudulent loaning, manifested and approved false employment and income documentation for the unauthorized borrowers; most were the illegal immigrants from

The demand for houses, along with a belief that home values would continually soar, fueled the building boom that would eventually result in our demise. Once the grace period on mortgage loans ended, and house prices began to decline, many people found themselves unable to escape the high monthly payments and began to default. Increasing foreclosures continued to lower the prices of homes, by 2008 it was estimated that 23% of all homes were worth less than their mortgages. 2.9 million vacant homes later, it is safe to say the consequences of short-sighted expenditures were severe. Since then, more than 6 million Americans have lost their homes to foreclosure. Much of the blame for the housing crisis can be traced back to rumor in the stock market. While homes are not typically viewed as investments under speculation, statistics show that this was not the case during the mortgage crisis. 22% of homes purchased in 2006 were for investment purposes.

The following essay will thoroughly examine the severe economic downturn of 2008, formerly known as the housing bubble collapse. We will mainly focus our discussion on the effects the financial crisis had on Canada and the U.S and examine why both countries were affected differently. Although the collapse of the housing bubble is the most identifiable cause, it is extremely difficult to pinpoint one specific defining moment or event triggering the global financial collapse. There are many factors involved, due to the complex nature of the financial systems across the world, and this paper will delve in the key contributing variables that led to this financial crises.

The stock market is what one would know as a collective group of buyers/sellers that trade stocks, also known as shares on a stock exchange. These securities are listed on the exchange itself and trade freely each and every day. On the exchange, stocks move hands day in and day out. Companies are able to get their stock listed on the exchange at any time that they want. There are other stocks, too...known as OTC stocks or over the counter stocks that go through a specific dealer. Larger companies tend to have their stocks listed on exchanges all throughout the world. Participants in the market can be anyone from your grandma, to retail investors, day traders, institutional investors, and so forth. One notable exchange is the NYSE; also known as The New York Stock Exchange. Moving forward, a stock market crash is when a decline of stock prices takes place throughout the stock market that results in a catastrophic loss of wealth via paper. The crashes are driven strictly by panic 9 times out of 10 a crash takes place. As a crash is happening, panic occurs; the panic keeps evolving and ends up like the snowball effect before you know it. A crash occurs when economic events take place. These events are always bad news... The behavior of traders follows, which leads to a crash when panic ensues. Crashes normally occur of a seven day period and may extend even further. Crashes happen in bear markets as the market is already weak to begin with. Once traders see a drop in prices,

In 2007 the real estate market collapsed leaving homeowners doomed. The collapsed had a negative impact on the United States economy and it also had a negative impact on five million families nationwide. Today, the real estate and mortgage market has significantly improved. This improvement allowed previous homeowners to have a clean start. The situation of the market has changed and advanced since the collapse. The homeowners that were affected by the real estate and mortgage market collapse were known as boomerang buyers because most of the families are or were allowed a second chance. As a result of the collapse, there were many mistakes that are avoidable today as to lessons learned. The market crash was a devastation but over the years the silver linings began comforting the nation. Today, many boomerang buyers are benefiting from their past mistakes. Consequently, there were lessons learned,

With all of the incentives and mortgage products given so easily to people that couldn’t afford the high prices (including interest rates), many people defaulted on their first mortgages because they were no longer were able to receive the profit from the homes they first intended to flip. “During the first quarter of 2008, nearly 9% of all mortgage holders were delinquent or in foreclosure, the highest rate since recordkeeping began in 1979. Foreclosure filings more than

In 2008, the market for purchasing and selling houses collapsed. Previous to 2008, speaking specifically between 2000 to 2006, many housing loan companies were offering a low interest rates, which lead to many lenders approving loan applications to individuals who had low or poor credit. When the collapse began, the once-low interest rates increased dramatically, causing many of those individuals were unable to keep up with their payments, which resulted in the foreclosure of their homes. To the extent of this dilemma, many banks went bankrupt, which lead to a number of Wall Street firms in taking a loss.

House bubble situation on the real estate market is presented by condition when there are low supply and high demand at the same time, which causes shortage on the market. (Yoshino, Nakamura and Sakai, 2013). Moreover, house price bubble is always associated with speculators who are buying houses with the goal to resell it in the short term. These conditions appeared on London real estate market and caused «Bubble Trouble». This essay will discuss main causes of the bubble, matters of its bursting and danger, connected with bursting.