When The Housing Market Collapse

However, hope might be on the horizon for the victims of the mortgage disaster of 2007/2008. Home buyers who were foreclosed upon years ago, or boomerang buyers, are beginning to be eligible to buy homes again. While some feel hope after feeling bamboozled by lenders and Fannie Mae and Freddie Mac, some feel anxious and fearful of the thought of buying again. Yet there are lessons that have been learned by the mortgage meltdown. Fannie Mae and Freddie Mac provided a lesson for the

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.

In 2008 the real estate market crashed because of the Graham-Leach-Bliley Act and Commodities Futures Modernization Act, which led to shady mortgage lending or “liar loans” (Hartman). The loans primarily approved for lower income and middle class borrowers with little income or no job income verification, which lead to many buyers purchasing homes they could not afford because everyone wants a piece of the American dream; homeownership. Because of “reckless lending to lower- and middle-income borrowers who could not afford to repay their loans many of the home buyers lost everything when the market collapsed” (Tankersley 3). Homeowners often continued to live in their houses for months or years without paying any

The desire for home ownership is something embedded in our DNA. Claiming property and owning a house is a critical part of the “American Dream.” Home ownership represents more than just a place to rest your head at night. Your home is the environment that serves as a setting for your journey through life. It’s the place of your children’s first steps, family birthdays, barbeques, amongst many other significant events. Your home is the backdrop that describes you and your family. Although many American’s were financially hurt by the trillions lost in the home equity market during the housing bubble, there is and will always be a desire to own a home. The most vital part is that American’s who lost their homes during the crash, learn from their past, so that they do not repeat a foreclosure.

For decades Americans couldn’t help but rejoice when they were able to own their very own home. The image of holding the keys and to quickly step foot into their home provided Americans with visons of prosperity. Many Americans whether poor, middle-class, or wealthy could now dream of endless possibilities when owning their very own home, as well as embracing a sense of accomplishment. These accomplishments or feelings were great at first; however, the realty for some Americans was that behind the glitz and glamor was a ticking time bomb. Now imagine the United States of America flourishing in the real estate sector and the US economy from Wall Street to individuals benefiting from the booming housing market. However, while all this was

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

More middle class and minority families than ever are now underwater in their mortgages, and have zero to negative wealth after the Great Recession that followed the 2000 housing boom (Potts 7). Even those who kept their homes saw their values drop due to the declined neighborhood worth. My childhood home’s peak value was over $200,000, but my parents listed it on the market with the hope of selling for just $175,000 when they wanted to move to lower their mortgage. There were never any foreclosures in our neighborhood, the house is in one of the best school systems in the state, and it had a great location, yet the value dropped more significantly than it had in twenty years. This was a situation many homeowners didn’t know was possible

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.

Record high unemployment, declining home values, and a recessionary climate have plunged the housing industry into a downward spiral. It started with lenient mortgage guidelines that allowed millions of people to achieve the American Dream of owning their own home. Eventually they ended up living beyond their means. Adjustable rate mortgages came due and realizing that they could not afford the jump in mortgage payment, homeowners began to put their homes up for sale. There weren’t enough buyers to keep up with the supply, and mortgages began to go into default. Families across America were faced with the reality that they could no longer afford to keep their homes, and foreclosures began to flood the market, leading the nation into a

The 2008 housing market meltdown in America created a ripple effect that had a negative impact on multiple real estate and stock markets throughout the world. Also, many people who were investors in the America market have never recovered from this financial disaster. So, one must contemplate how this event could have transpired in a country with such a strong economy with governmental regulations designed to protect the average investor. Nevertheless, it is simple, it took brokers, real estate appraisers, realtors, Wall Street, and mortgage companies combined unethical behavior to allow greed to be his or her guidance in pursuing wealth form unsuspecting new home purchasers who could afford his and her recent purchase, a new house.

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 Big Short is a movie that discusses the housing market crash in 2008. As you may know, the banks, the mortgage brokers, and the consumers were all affected by this collapse. On each level of the system, there were things that went wrong and that could have been changed that could have prevented the failure of the housing market.

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

Establish Credibility: According to US News, the great American dream of owning a home appears poised for a comeback. Real estate company Trulia reports that in many parts of the country, rents are rising while housing prices are falling, making buying a home more affordable. Trulia found that in 98 out of 100 major metropolitan areas, including Detroit, Atlanta, and Cleveland, buying has become more affordable than renting.” I think the mortgage catastrophe of 2001 left prospective home buyers afraid of buying a house without being extremely certain that is the right decision.