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Effects Of The Housing Crash Of 2008

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The housing crash of 2008 was a financial crisis that occurred in the United States and had a ripple effect across the world. The housing market had been booming for several years, and many people had taken out large mortgages to buy homes they couldn't afford. Banks and other financial institutions were eager to lend money to these buyers and they often packaged these mortgages into complex financial instruments that were sold to investors. However as the housing market began to slow down many homeowners found themselves unable to keep up with their mortgage payments. This led to a wave of foreclosures and a glut of homes on the market which in turn caused home prices to plummet. This created a downward spiral, as homeowners who owed more on their mortgages than their homes were worth found themselves in a precarious …show more content…

The fallout from the housing crash was widespread and long-lasting. Millions of homeowners lost their homes and many more saw the value of their homes plummet. Banks and other financial institutions suffered significant losses, and some even went bankrupt. The stock market also took a hit, as investors lost confidence in the financial system. The US government and other countries implemented various measures to try to stabilize the economy and prevent a complete collapse. The Federal Reserve lowered interest rates to make borrowing easier and the government provided bailouts and stimulus packages to banks and other industries. However these measures were not without controversy, and some argued that they only prolonged the inevitable correction of the housing market. The housing crash of 2008 highlighted the dangers of a housing bubble and the importance of responsible lending practices. It also exposed flaws in the financial system and led to increased regulations and oversight of the

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Overall, it was the combination of the desire for money mixed with ignorance towards making quality financial decisions that led to the financial crisis. 2. In the past, to get a mortgage you had to go through a series of steps; list them. Show up at the bank with tax records, pay stubs (to verify your income) and proof that you have enough savings to make a 20% down payment

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Even though many factors contributed to cause the Great depression, many argue that the biggest contributor was the stock market crash in 1929. During the years, previous to the recession, real state became very popular market to invest in. People were borrowing a great deal of money from banks to invest on purchasing lands, fixing roads, building houses, and buying houses. Even though people did not have enough money to repay their loans, they continued to borrow more, because of low tax returns. People believed that if they waited longer to invest, prices and interest rates will increase.

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Fortunes disappeared within days and people surrounded the banks in an effort to withdraw their life savings which was often too late causing panic. This caused the political, economic and social organizations in the US to collapse to all-time

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When the stock market crashed, wealthy people had all their saved money wiped. People couldn’t really take loans out because they were in debt owing money to the bank. After banks shut down, then local stores, factories, and restaurants all shut down. This then escalated into unemployment. Over 600% of citizens were unemployed and had no income.

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When these stocks crashed banks were left without money and many had to close down. People lined outside of banks for hours to try and get their savings money out. This was impossible since banks did not have enough money. Millions of people lost their savings and were unable to get the money they needed to support their families. This also led to a big rise in unemployment.

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Everything was normal, people were happy with jobs and being able to provide a home and food for their families. Until things weren’t normal. The stock markets crashed on October 29, 1929. This was the beginning an economic downfall throughout the nation and most of the world. Many people had lost their jobs and were homeless.

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The Federal housing administration distributed government insured loans in order to buy houses. This allowed people to willingly buy houses fearlessly. This meant that the housing market fail was relieved of its deflated prices. The FHA not only decreased homelessness, but it also helped contribute to the economy by returning the housing prices and made house sales more frequent providing more jobs in real estate. The Home Owner’s loan corporation also helped fight against the housing crisis.

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Companies cut production and began firing workers, wages collapsed. Many Americans fell into a debt that lasted for decades, and many of their possessions were repossessed or foreclosed (History 2). Since the United States and the rest of the world’s economy was fixed on the gold standard, the Great Depression spread around the world. The world was set in panic, even though President Hoover and other leaders assured that the economic failure would correct itself in time. In the next few years, unemployment rates were sky high, and soon breadlines and ghettos began to appear through major cities (History

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Families not only lost their saving as the banking system collapsed, but they were also unable to pay mortgages, rent and were deprived and evicted from their houses. The effects of the depression were

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For example, the stock market’s tumble led to the failure of many thousands of banks in the coming months, this panic led to bank rushes, where people were desperately trying to withdraw all of their savings before the banks were forced to shut down. In turn, these bank rushes caused many more banks to collapse, and the vicious cycle continued. Over 9,000 banks failed by the end of the decade (Kelly). Furthermore, with lack of money in cycle, people began spending less on commercial goods, and the economy suffered as a result. Many banks, much to their customers’ dismay, had invested a good chunk of their money in the stock market, so as Americans rushed to take their money out, they were stunned to learn that much of it wasn’t there.

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Impact and response of the 2007 to 2009 recession The Great Recession of 2007-2009 proves to be one of the most profound economic crises in recent history, evident in the lasting effects on global economies and financial systems. The Great Recession was characterized by a steep decline in economic activity, widespread unemployment, and a collapse in the housing market, which left lasting scars on individuals, businesses, and governments globally. Through analysis of the recession, we can contextualize the decision-making made by economic institutions through fiscal and monetary policy to understand policy effectiveness and how we approach economic crises. The recession began with the collapse of the housing market, caused by risky lending practices,

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This led to the market crash of 1929 which triggered a chain reaction that caused many businesses to fail and led to widespread unemployment. Additionally, the failure of the banking system coupled with the crash and inaction from the Federal Reserve made the Depression worse. There was a wave of bank failures due to many banks being unable to withstand the economic pressure. People run to banks to withdraw their savings out of fear that the bank would fail because, at the time, the Federal Deposit Insurance Corporation did not exist. As banks failed, people lost their savings, and credit became scarce, making it difficult for businesses to get the loans they needed to operate.

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Sheree R. Curry article talks about 5 contributing factors in the housing market crash, low doc loans, Adjustable rate mortgages, equity line of credit, more money down needed and mortgage insurance. Low Doc Loans are loans that do not require much information and do not require borrowers to provide documentation of their income to lenders, Adjustable rate mortgages were made to adjust periodically to reflect market conditions, equity line of credit is a loan in which the lender agrees to lend a maximum amount of money and has to be paid by a certain time, you also need more money down “minimum has now increased to 10% down.” This quote shows increase in a down payment, mortgage insurance used to get replaced by people putting 20 percent down on a FHA-backed mortgage and avoid paying the

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Stocks were overvalued, whether it was a house loan, borrowed money or technology, people invested it. With all these investors in companies it caused the value to decline rapidly. Not only did your day to day people invest in stocks bigger companies did too, like banks. When the stock market crashed many people ran to the banks to gather the rest of their money, banks enabled a first come first serve rule until they ran out of money and closed down. Commercial banks were able to stay open due to the government's efforts in lowering the discount rate, allowing some banks to stay

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This approach can be directly used when looking at the housing crisis in America, where the current housing system is unsustainable and requires radical change. The financialization of housing is a primary cause of the housing crisis. After the Great Recession in 2008, many investors saw an opportunity to profit from the houses that were foreclosed. These investors began to purchase the homes that had recently been foreclosed and rent them out.

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