The Recession Of Real Estate Boom

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.

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.

The foreclosure crisis that devastated our economy several years ago not only impacted the middle class wealth but also the upper class wealth. The upper class families who were not prepared for this crisishad to downsize their primary homes or utilize their investments and savings to keep their properties. The middle class families were hit the hardest during this crisis with losing there homes, depleting their life savings and investments. The middle class families who were forced to foreclose on their homes due to their loss of income and financial security moved into rental apartments or moved to a family members home to regroup from this crisis. Areas that may have added to foreclosures or short sales were the lost of many jobs due to a corporation downsizing of their employees, or the over appraising of a property if the property was appraised higher than the true value or what a buyer was willing to pay for the property. Homeowners were forced to sale their property at a lower price if the homeowner was in the process of a divorce, relocating for a job or foreclosing because they had fallen behind on their mortgage payments.I have seen circumstances where certain peoplelived above their means by spending more for a home or nonessential items like luxury vehicles they couldnot actually afford to pay.

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.

These two families represent the homeowners who, if given a second chance, should be able to continue to be homeowners. They were victims of a recipe for disaster created by lenient mortgage guidelines and a recessionary economy. My plan is to keep these homeowners as homeowners, create new affordable mortgages, and decrease the supply of homes on the market. This will begin an upward trend in the housing industry that will stimulate the economy, and bring us one step closer to ending the recession.

Anyone that was living in America, or even watching from abroad, knows that in 2008 America had a huge collapse of the housing market. Homes were foreclosed on in record numbers causing the real estate balloon to burst. But the collapse did not happen overnight and in many ways was destined to happen. According to Investopedia.com in order to attract buyers and sell houses, mortgages were offered to less than qualified applicants. Then just a few years before the collapse subprime mortgages made up 20% of the market. (Investopedia.com) Factors such as the 1993 passage of the North American Free Trade Agreement (NAFTA) and the 9-11 terrorist attacks led to an increase in unemployment. With unemployment numbers climbing many homeowners

In 2001, the United States endured a short unexpected decline in the economy. With the terrorist attack at 9/11 and accounting scandals, a decline in the U.S economy was an obsession in the minds of the American people. However, in order to keep things at peace, the Federal Reserve determined that they will lower the Federal funds 11 times. The rate was then lowered from 6.5% to 1.75% in a matter of one year. This allowed bankers the power to award more borrowers with loans even if they had no job, income, or even assets. Even with no way of obtaining any income the dream of buying a home became a reality. It wasn’t long before everything became way cheaper.

It has been 7 years since the housing bubble burst and the financial systems collapsed back in 2008. Since then, some will say that the housing market, as a majority, has healed and regained footing but is that entirely accurate? It has been an up and down rollercoaster since the collapse of 2008, however the housing market has only started to recover within the past 2 years. “Right now, I would say we are 64% back to normal and a lot of what is driving the housing market’s strength is existing home sales, but prices have also helped push the recovery” (Jed Kolko, Trulia). As stated in the first paper, the housing bubble burst because of the increase in interest rates that put homeownership out of reach for some buyers. This ultimately caused homes to become unaffordable, leading to defaults, foreclosures, and short sales. More so, on December 30, 2008, the home price index reported the largest dip in home prices ever recorded, losing 33% from its 2006 peak to 2012. This financial crisis, unanticipated by most, caused the United States to go into a recession and has been known to be most significant risk to our economy. It was the beginning of last decade, 2000, when real estate prices rose at an unprecedented rate, subsequently leading to the bursting of the housing bubble starting in 2006.

The financial collapse of the U.S. economy that occurred in 2008 created a foreclosure crisis that resulted in thousands of homeowners losing their properties nationwide. This great recession caused many homeowners to even lose their jobs, savings, and credit worthiness. Predatory lending was a major contributing factor in these foreclosures.

As a member of the Millennial’s and as a student of economics, The Great Recession, the greatest economic downturn we’ve seen in 70 years is truly an intriguing topic. It is the first economic crisis that many of my generation can truly say we lived through. With the burst of the housing bubble and the failure of various financial institutions, the United States was dragged kicking and screaming from the prosperous age of nearly uninterrupted economic growth since the early eighties, into an unemployment rate of over 9% and a decline in Real GDP in the first time in decades. Years after the end of the recession we still reel from its effects. How did the fiscal crisis begin in the first place? What institutions helped exasperate the

If there is one thing we have learned in the last decade, it’s that almost no one is immune from financial struggles. When the struggle is too much, sometimes it forces us to take drastic measures to survive and move forward in the wake of those struggles. When financial crisis hits we downsize, cutback, and in extreme cases walk away. We are not too far removed from “mortgage meltdown” that began in 2007. Since that time we have seen a significant increase in the amount of foreclosures, short sales, deed in lieu, cash for keys, and bankruptcies.

The recession that started in December 2007 and has lasted through 2009 has been the worst economic downturn of my lifetime, and after listening to my parents and grandparents I realize this could be one of the worst recessions in generations. We can all acknowledge that this period of time since 2007 has been the most difficult period in generations for so many middle class Americans who thought they were secure or within reach of the American dream to own their own homes. I have heard people on TV and on the national stage debate the reasons and the impact of the foreclosure crisis on the economy. This debate has been frustrating because people focus too much on arguing who is right or who was wrong; some people claim the foreclosure

There is no better way to describe the foreclosure crisis than exactly that. A crisis. Crisis is defined as a time of intense difficulty, trouble, or danger. I don’t know if there was anyone in the country who wasn’t affected by the crisis and put into difficult situations. Along with that many people were in danger of losing their homes or a lot of business owners were scared because people became much tighter with their money.

The housing sector had served as the backbone of the US economic growth and investment opportunity that propagated several US families into middle-class status. The financial crisis devastated the real estate market that left many institutions facing foreclosure and stripping families of the accumulated wealth. Job growth rate was affected by the crisis since businesses faced closure for lack of access to money hence massive downsizing. Slashed spending was experienced in states in education, public assistance programs and the transportation sector to recoup the losses . Families were affected by the shrinking of the public workforces through the cuts in state and local public employees. The significant labor changes in the states affected many American families, and the myriad lessons led to the implementation of changes to reawaken the economy. The economic situation in the US since the market crash was caused by the housing crisis. The calamity showed a significant improvement with the new generation of boomerang buyers getting back into the market.

For many, their credit reports were damaged in the Fall, and there are still people carrying unserviceable debts or even bankrupt. A major lesson learned by homeowners would be to “cut your coat according to your cloth.” It is not worth it if you own a place only to be able to claim the title of homeowner, or even just to boast about it. You clearly have to think through maintaining and servicing its financing over the long term. Also, many home owners are sure looking into the smarter (and ultimately higher) route in paying initially in cash – as much as can be afforded, of course. Investors are now more educated and would not just jump at anything real estate without doing good research. They are asking the right questions and taking their time in committing funds. The silver lining would be that the market has since bottomed out and can only go up now. This has resulted in growing confidence in the real estate market which will further boost overall economic