Rise and Fall Housing Market
The Rise and Fall of the Housing Market
Edward Maher
University of Maryland University College
ECON201
August 18, 2011
Introduction
The collapse of the housing market had far and wide ranging effects in the economy of the United States. While the effects were felt throughout the country, California, Florida, New York, Michigan, Illinois were dealt devastating blows to their respective economy. Throughout the country, foreclosures rose to staggering numbers and jobs lost were in the millions. This research paper will concentrate on the causes and consequences of the housing crisis and will attempt to determine if there is any fault for not controlling the crisis.
Causes of the Housing Crisis The term bubble has been used synominously with the housing crisis. What is a bubble? According to the Webster dictionary an economic bubble is, “a state of booming economic activity that often ends in a sudden collapse.” American economist Robert Shiller of Yale University describes an economic bubble as “A bubble occurs when exaggerated expectations of future prices increase unusual demand either by people who fear being priced out of a market or by investors hoping to make a lot of money fast. A bubble is a self-fulfilling prophecy for a while, as successive rounds of buyers push prices higher and higher. But the willingness to pay higher and higher prices in fragile: It will end whenever buyers perceive that prices are no longer going up. Hence bubbles carry the seeds of their own destruction. Only time is needed for bubbles to end.” While there are many variations defining a bubble, all are consistent that there will be a “pop” or end to the bubble. Over the last half of the century the US Government has pushed an intrinsic notion that owning a home is part of the American dream. The government has mad homeownership as a public policy goal and offers numerous incentives such as ability to deduct interest accrued from their mortgage and
Edward Maher
University of Maryland University College
ECON201
August 18, 2011
Introduction
The collapse of the housing market had far and wide ranging effects in the economy of the United States. While the effects were felt throughout the country, California, Florida, New York, Michigan, Illinois were dealt devastating blows to their respective economy. Throughout the country, foreclosures rose to staggering numbers and jobs lost were in the millions. This research paper will concentrate on the causes and consequences of the housing crisis and will attempt to determine if there is any fault for not controlling the crisis.
Causes of the Housing Crisis The term bubble has been used synominously with the housing crisis. What is a bubble? According to the Webster dictionary an economic bubble is, “a state of booming economic activity that often ends in a sudden collapse.” American economist Robert Shiller of Yale University describes an economic bubble as “A bubble occurs when exaggerated expectations of future prices increase unusual demand either by people who fear being priced out of a market or by investors hoping to make a lot of money fast. A bubble is a self-fulfilling prophecy for a while, as successive rounds of buyers push prices higher and higher. But the willingness to pay higher and higher prices in fragile: It will end whenever buyers perceive that prices are no longer going up. Hence bubbles carry the seeds of their own destruction. Only time is needed for bubbles to end.” While there are many variations defining a bubble, all are consistent that there will be a “pop” or end to the bubble. Over the last half of the century the US Government has pushed an intrinsic notion that owning a home is part of the American dream. The government has mad homeownership as a public policy goal and offers numerous incentives such as ability to deduct interest accrued from their mortgage and
References: Peppercorn, I. (n.d.). The Tragedy of the Mortgage Commons. http://www.apuhf.info. Retrieved August 7, 2011, from www.apuhf.info/Presentation/Peppercorn_TragedyoftheMortgageCommons_presentation.pdf Pickert, K Schiller, R. (n.d.). Home Page of Robert J. Shiller. Welcome to the Department of Economics, Yale University. Retrieved August 2, 2011, from http://www.econ.yale.edu/~shiller U.S visiting. (n.d.). History Of Fannie Mae. A Consumer 's Guide To The Mortgage Process. Retrieved August 11, 2011, from http://www.alliemae.org/historyoffanniemae.html -------------------------------------------- [ 1 ]. Bubble - definition and more from the free merriam-webster dictionary. (2011). Retrieved from http://www.merriam-webster.com/dictionary/bubble [ 2 ] [ 5 ]. History of fannie mae. (2004). Retrieved from http://www.alliemae.org/historyoffanniemae.html [ 6 ] [ 7 ]. Garriga, C, Gavin, W.T, & Schlagenhauf, D. (2011, June 6). The rise and fall of the u.s. housing market | junior achievement of the palm beaches. Retrieved from http://juniorachievement.com/index.cfm?fuseaction=news.details&ArticleId=43 [ 8 ] [ 9 ]. The rise and fall of the u.s. housing market | junior achievement of the palm beaches. (2011, June 6). Retrieved from http://juniorachievement.com/index.cfm?fuseaction=news.details&ArticleId=43 [ 10 ] [ 11 ]. Bianco, K. (2008). The subprime lending crisis: causes and effects of the mortgage meltdown. [ 12 ]. Bianco, K. (2008). The subprime lending crisis: causes and effects of the mortgage meltdown. [ 13 ]. The rise and fall of the u.s. housing market | junior achievement of the palm beaches. (2011, June 6). Retrieved from http://juniorachievement.com/index.cfm?fuseaction=news.details&ArticleId=43 [ 14 ] [ 15 ]. Foreclosure real estate listings | realtytrac . (2011). Retrieved from http://www.realtytrac.com/pub/landing/optimized_c.asp?a=b&accnt=219329 [ 16 ] [ 17 ]. Bianco, K. (2008). The subprime lending crisis: causes and effects of the mortgage meltdown. [ 18 ]. Carney, J. (2009, June 27). Here 's how the community reinvestment act led to the housing bubble 's lax lending. Retrieved from http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6