...Impact of Housing Market Crash “The Impact of housing Market Crash on Global Economy” The housing market in the United States became a nightmare for many people who had taken out loans found and they were not able to pay their mortgage repayments. When the value of homes decreased, the borrowers realized themselves with negative capital. The negative movement of housing sector did effect the United States economy. Individual house owners and investors could not react to the situation and their properties lost value. Rates of mortgages increased extremely high that’s why mortgages no longer became affordable for many people, and thousands of mortgages defaulted. Many banks and investment organizations start have difficult time finding money due to massive losses in mortgage. This also caused slow down the housing market, growth of new home building and putting many people in unemployment environment. Depressed housing prices made many homes worth much less than the mortgage value therefore some owners chose just walk away instead of pay their mortgage. The housing sector is one of the most important chains in the economy. After the housing market crash, the economy could not run as usual because this chain had a big impact in the United States economy. Therefore the other fields and sectors ruined by the circumstances. Briefly, the domestic crisis started to change the consumer behaviors. People reduced their spending and that effected the volume of the...
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...Martinez Research Paper 1) The Exposition In Christopher Papagianis’s and Arpit Gupta’s article, “Making the Housing Market Work Again,” the two provide a descriptive summary of the causes of the housing market collapse in the United States which spurs the Great Recession of the late 2000s. The authors use the actions taken by two groups before, during, and after the recession, as tools to show what not to do when dealing with the housing industry. They then build off these mistakes and offer advice for the future to the two main players in their article, the borrowers and the policy makers. The article does a great job of identifying the problems and raising flags on mistakes made by all parties, but in my opinion the authors did not redirect the blame equally. I believe that the general public was not criticized enough for their part in the collapse, as illogical decisions, specifically with their reliance on credit, led large scale loss in the long term. Where the authors point fingers at borrowers and policy makers for allowing ill-fit people to take out a loan, I blame the people for taking out a loan that they should have known they could never afford in the first place, and explain how we can avoid these economic downturns in the future. The two begin their article by discussing the causes of the housing market crash. They pinpointed the main reason for the crash by discussing how a large number of loans being taken out for things such as homes, cars and boats, were being...
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...real estate market in the decade. However, we do not see any slowdown in these cities. As of today, the property prices seem to keep on growing forever. Will China’s housing bubble pop? Compare the housing bubbles in the United States with that in China * A brief background information about the housing market in US before it crashed down * Elaborate on China’s current housing market and see how close is it to the housing market condition in the US Different views on China’s housing bubble * Optimists think that even if the housing market crashes down in the near future, it will not create another global financial disaster * Some think that the bubble will never crash under the guidance of our communist party * Some debate on the implementation of the new policies Conclusion: China and the world have to learn a lesson, and try to maintain a healthy, long-term economic sustainability. Will China’s housing bubble pop? Is it just merely a matter of time when the housing market comes to a crash, or will it not at all? Should a burst of the bubbles cause another worldwide economic downturn and probably a global recession? These are probably the most heated debates by the economists of the world today. The soaring property prices in China’s coastline and major cities such as Beijing, Shanghai, Shenzhen, and Dalian with a mortgage to average household’s annual income ratio of as high as 35% has formed the biggest bubbles in the real estate market in the decade...
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...experienced a drop in the stock market so fast and unexpected that it has been called the “Great Recession” (Santucci, 2011) and the “Crash of 2008” (Crash of 2008, 2010). Many things contributed to the recession, but the main cause was sub-prime lending by banks. Basically banks were lending money to people to buy homes that they couldn't afford. Due to the sub-prime mortgages going belly-up, along with the spiraling effects of bank failures such as the automotive industry needing to borrow billions of dollars, the U.S. Economy experienced is worst economic situations since the Great Depression. The causes of the recession date back many years, and as far back as 1980. This is when bank deregulation begins (Crash of 2008, 2010), which means less qualifications are needed to give out a loan. This recession could have been foreseen by some since in 1987, there was a stock market crash that occurred after the banking deregulation began (Crash of 2008, 2010). As we get closer to the Crash of 2008, we find that there are more and more subtle signs. One of the biggest early signs was in 2001 when the annual issue of US mortgage backed bonds increased from $500- $2,000 billion (Crash of 2008, 2010). Also, with the U.S. Backing more bonds at such a high rate and causing the interest rates at an all time low, from 2001 to the third quarter in 2006, the average house value was raised by 80% (Crash of 2008, 2010). After this time, the housing market experienced a slight drop in the...
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...after the housing market crashed in 2008 the primary cause of the crash continues to be debated. Speeches have been made and books have been written on the subject. Observers and analysts have attributed the reason for the housing crisis and its collapse in the U.S. to everyone from home buyers, Wall Street, mortgage brokers, mortgage underwriters, investment banks, rating agencies, investors, low mortgage interest rates, low short-term interest rates, and relaxed standards for mortgage loans. Predatory lending was just one of many factors along this transaction chain. Predatory lending consists of loaning money to consumers in the hope and expectation that they will default and the lender will be able to take the collateral (homes.) We will discuss if the government failed to protect its citizens thru public policy and what role (if any) investments in mortgage backed securities played in the market crash of 2008 as well. While economist continue to debate who or what is at fault. The market crash clearly devastated the U.S. economy. We will also discuss how such devastation is considered to be one of the worst market failures in history. The events leading up to the crash are easier to identify after a crash, the signs were in the forefront and ignored by most people, firms, banks, and the government. Together we will embark on a journey to discover what role predatory lending, mortgage backed securities, and relaxed regulations played in the housing market crash of 2008...
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...The Great Depression happened when the economy failed. The stock market crashed, banks were closing, and there was a reduction in purchasing, Smoot-Hawley tariff, and the drought in the Mississippi valley. These effects made many Americans lower their standard of living. The Stock Market Crash of 1929 was a big reason the Great Depression happened. The crash didn’t happen in a single day, it took a few days of constant plummet. On Black Thursday, October 24, 1929, about 13 million shares were trade setting a record. On that day, the prices dropped so rapidly, the ticker could not keep up. The next day, several large bankers met to try to solve the situation. They tried to buy steel above market price, but it only had short effects. Many investors lost faith and started selling their shares. The next few days 16 millions of stocks were trade and on the famous Black Tuesday, the market lost 14 billion dollars. Years leading up the crash showed that the Stock Market was a popular way to become rich in a safe investment. Many people were purchasing stock on margin which wasn’t smart because when the stock lost value, you had to pay back the borrowed money. This lead the stock prices to rise really high. So when investors realized that, they started selling their stock making the prices drop. The Stock Market crash was not the only factor in the Great Depression. Banks were failing because they had lost a large amount of money. This money came from savings accounts which was bad...
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...Although Houston has a relatively high risk for falling home prices compared to other cities, it’s important to remember that Houston’s risk is considered “moderate,” according to Arch’s risk model. Houston still is far from reaching the 90 percent risk level that Florida and other parts of the country saw right before the 2008 housing crash, DeFranco said. “Houston is the riskiest in a very stable national economy,” DeFranco said. “There’s a potential risk (for home price declines), but it’s not inevitable.” Houston is at risk because its economy is still largely oil-dependent, DeFranco said. Although the Bayou City’s economy has become more diversified since the devastating oil crash of 1980s, the oil and natural gas industry still constitutes about 38 percent of the local economy, according to the Greater Houston Partnership. With oil prices hovering near six-year lows, Houston energy companies have announced budget and job cuts, the latter of which directly impacts Arch’s risk model. While most of these cuts have occurred in the oilfields and not so much in Houston, DeFranco believes there could be a trickle-down effect on Houston’s housing market. “The hard data show that (Houston) looks...
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... Aim 3 Limitation 3 UK Housing Market 3 Review of UK housing market 3-6 Factors effect in UK housing market price 7-14 a) Demand 7-11 b) Supply 12-14 Present situation/scenario 15 Government innovation 19-21 Conclusion 22 References 23-24 INTRODUCTION The UK housing market has experienced a varied rate of ups and downs in house prices for past few decades. During the past 30-year period, the nominal and real average annual price in UK has undergone volatile changes. There were three boom periods: 1980s, late 1990s and early 2000 and a bust in early 1990s (Sloman, John2006). These rise and falls in house prices had been primarily caused by the changes in demand for housing. Being a big open economy, UK is not really affected by external shocks caused by changes in international prices and currencies but by various internal and associated factors. Money supply and government policies are believed to be important factors behind the booms. The primary reason behind the increase of money supply was continuing high economic growth during the concerned period. From examination of historical development of the UK housing market, it can be argued that house prices fundamentally come under pressure from many aspects: demographic pressure, increasing income, accumulated wealth and so on. However, present trend of the housing market has not given birth to any alien determinant that is causing the market to behave abnormally. This paper attempts...
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...Underwriting When it comes to underwriting standards it is very important to understand that the action that are taken today will or can affect the future of real estate. The housing market crash was an eye opener for a lot of people in the real estate market. The blame for this can be speeded from the lenders, to the appraiser and the buyers. Underwriting standards are design to help and to ensure that proper procedures are followed, not to make a quick buck. Lenders that that use and apply the correct standards when it comes to underwriting a real estate contract are telling the buyer how much debt to income they will have when taking own this loan. How much interest they can expect to pay over the course of the loan and when it will be...
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...Reserve Chairman (1987) 1.Stock Market crash -Savings and Loan Crisis (1988-1982) 1. Bank Failures 2. Recession -Economy Growth(1993-2000) 1. Dot.com ere 2. Federal Surplus 3. Millennium 4.Clinton Era -(2001), and beyond on the economy 1.President Bush 2.9/11 3.Recession 4. Dot.com bubble 5. Housing boom and bubble -Conclusion(2006) 1. Greenspan Retires Alan Greenspan was the Federal Reserve chairman for the last nineteen years he was the longest chairman in that position. Alan Greenspan was first appointed by President Ronald Reagan in 1987 and retired under President Bush in 2006. The chairman of the Federal Reserve is appointed every four years by the president, and then the Senate. The Federal Reserve is in charge of the financial system in the United States, and is independent part of the government that is not influenced by politics. The duties of the Federal Reserve are to preserve a sound banking system, preserve the power of dollar, print money if needed, and to regulate interest rate policies. Alan Greenspan had massive influence on the economy when he was the chairman of the reserve he set the tone of the economy when the Federal Reserve met, and that was mostly done by regulating interest rates. After Alan Greenspan retired in 2006 many economist came out and blamed Greenspan for keeping the interest rates to low between 2001 to 2005 in which caused the housing crisis in 2007.(Federal Reserve...
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...arch 341 Selected Issues/Problems Paper Team “B” University of Phoenix RES/341 Paul Mahajan Introduction Compiling statistical information for the housing market has been a challenging task. There are many forms, articles, publications, and internet sites that provide information on the current state of the housing market. The following paper will illustrate a consolidation of all of the research information gathered from various sources. This paper will show the measures of central tendency, dispersion, and skew for all of the data collected. The research gathered will also display descriptive statistical data using graphic and tabular techniques. With all information gathered, this paper will discuss the best measures of central tendency and dispersion of all the statistical data collected. Purpose of the Research The purpose of the research is to show the current trends in the housing market. To own a home or business of which somebody can call their own is the American dream. American’s search far and wide to find the right home or business location that fits perfectly for their family’s or business needs. People looking for homes are constantly doing research on prices of homes, number of bedrooms, and number of Individuals looking for a place to establish their business must decide on which location works best for their new business. Real Estate agents use the same research to get the specific details of homes or office buildings so they can sell...
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...Typically, there will be a “goldilocks” economy or an irrational exuberance prior to a recession, followed by a market crash. Prior to the 2007 – 2009 recession, the housing market was going up. Everyone “knew” house values could only go up and behaved accordingly; banks lent too much money to consumers bought too much house. Once the market crashed, the stage was set for a recession. Many factors affecting the aggregate demand curve had declines. As mentioned, home equity declined, as well as the stock market. This decrease in wealth decreased consumption and consumer confidence leading to lower spending. As consumers cut back on spending, business confidence also fell with additional decreases in consumption and also investments. Additionally, foreign GDPs were also declining leading to a decrease in exports. The changes in these variables all caused a shift back in the aggregate demand curve, lowering the GDP. Attempting to counteract the recession, the Federal Reserve pumped money into the economy, increasing the nominal money supply. As the value of the dollar decreased, interest rates were kept low, allowing the exchange rate to remain favorable for exports. Additionally the government increased spending by way of stimulus packages for banks, automakers and tax rebates and incentives. These changes in variables caused the aggregate demand cure to shift out. However, the effect of the exchange rate, government spending and increases in the nominal money supply were small compared...
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...Determining Causes and Effects Revised Version Personal budgeting is an important factor in regards to successful long term financial stability. Budgeting has many great aspects as well as showing areas of weakness. It can show the truth about your personal financial spending habits, areas that are not looked at enough, and if there are needs for a larger emergency fund. The reality of personal budgeting is that many people potentially do not keep a personal budget for one reason or another. People also don’t consider the negative effect that it could have on one personally and or how it effects the economy. One major reason that an individual does not keep a personal budget would be the lack of knowledge on how to possess a successful budget of their finances. An individual may not know how to properly construct a budget that will help them become financially savvy. The client could be unaware of how to make a budget balance, how to correctly allocate funds, or even which areas are really the important factors. Excel is a great tool for budgeting if you can utilize the application. But if one does not know how to distribute their funds properly, you could come up short when needing money for bill or to fill your gas tank up to get to work to make an income, which turns into a vicious cycle. This lack of information and know how could deter someone from even thinking about budgeting. Not only is lack of knowledge a serious factor, a person could make more money than their...
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...argue that market failure, particularly in the housing sector, was the primary cause for the crash. Unfortunately my research has lead me in a different direction. According to the discussions we had in class that means I should be arguing from the perspective that the crisis was caused by government intervention then, right? I’m not so sure that’s the case either. Instead I’ll argue that the financial crisis of 2007-08 and the following “Great Recession” were the result of a perfect storm of both regulatory and market failure. Senators Carl Levin and Tom Coburn lead a 2-year long Senate subcommittee investigation into the crash. In April 2011 they released a 635 page report on their findings where they concluded that there was indeed no singular cause of the crash. The bipartisan subcommittee implicates several primary causes. Inflated credit ratings on mortgage related securities are cited as being “…the most immediate cause of the financial crisis…” The two primary rating firms, Standard & Poors and Moody’s had been assigning risk profiles to mortgage related securities similar to that of Treasury Bills – widely regarded as the most secure investment you can make since the government can just print money to pay you. In July of 2007 both firms did massive downgrades that exposed how risky these investments actually were. The downgrades resulted in a market panic that profoundly reduced the value of the securities and effectively collapsed the market for them. Perhaps...
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...Borrowers got into high risk mortgages such as option-ARMs, and they qualified for mortgages with little or no documentation. Even people with bad credit could qualify as subprime borrowers. Fraud on the part of homebuyers and mortgage brokers helped make the mortgage crisis more serious. Mortgage applications were not checked for accuracy as well as they should have been. This is what started the subprime mortgage crisis, popularly known as the “mortgage mess” or “mortgage meltdown,” came to the public’s attention when a steep rise in home foreclosures in 2006 spiraled seemingly out of control in 2007, triggering a national financial crisis that went global within the year. Consumer spending is down, the housing market has plummeted, foreclosure numbers continue to rise and the stock market has been shaken. The subprime crisis and resulting foreclosure fallout has caused dissension among consumers,...
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