Difference between revisions of "Housing boom"
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(helping you out, Ed. :D You forgot to "plant a seed" when you started this.) |
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The '''housing boom''' of the early 2000s turned into a burst bubble, thanks to shortsighted economic policies. | The '''housing boom''' of the early 2000s turned into a burst bubble, thanks to shortsighted economic policies. | ||
:Buyers bought houses they couldn't afford, believing they could refinance in the future and benefit from the ongoing appreciation. Lenders assumed that even if everything else went wrong, properties could still be sold for more than they cost and the loan could be repaid. | :Buyers bought houses they couldn't afford, believing they could refinance in the future and benefit from the ongoing appreciation. Lenders assumed that even if everything else went wrong, properties could still be sold for more than they cost and the loan could be repaid. | ||
| − | Why did this happen? | + | *Why did this happen? |
:The Fed's sharp, prolonged reduction in interest rates stimulated a housing market that was already booming -- triggering six years of double-digit increases in housing prices during a period when the general inflation rate was low. | :The Fed's sharp, prolonged reduction in interest rates stimulated a housing market that was already booming -- triggering six years of double-digit increases in housing prices during a period when the general inflation rate was low. | ||
| − | What does it mean? | + | *What does it mean? |
| − | :If this crisis proves nothing else, it proves you cannot help people by lending them more money than they can pay back. [http://www.heartland.org/article/24759/Deregulation_and_the_Financial_Panic_Loose_Money_and_Politicized_Mortgages_Are_the_Real_Villains.html] | + | :If this crisis proves nothing else, it proves you cannot help people by lending them more money than they can pay back. <ref>[http://www.heartland.org/article/24759/Deregulation_and_the_Financial_Panic_Loose_Money_and_Politicized_Mortgages_Are_the_Real_Villains.html Politicized Mortgages Are the Real Villains] |
| + | </ref> | ||
| + | |||
| + | == Also See == | ||
| − | |||
* [[Subprime loan|subprime mortgages]] | * [[Subprime loan|subprime mortgages]] | ||
* [[Community Reinvestment Act]] | * [[Community Reinvestment Act]] | ||
* [[Recession of 2008]] | * [[Recession of 2008]] | ||
| + | |||
| + | == References == | ||
| + | {{reflist}} | ||
Revision as of 20:41, March 10, 2009
The housing boom of the early 2000s turned into a burst bubble, thanks to shortsighted economic policies.
- Buyers bought houses they couldn't afford, believing they could refinance in the future and benefit from the ongoing appreciation. Lenders assumed that even if everything else went wrong, properties could still be sold for more than they cost and the loan could be repaid.
- Why did this happen?
- The Fed's sharp, prolonged reduction in interest rates stimulated a housing market that was already booming -- triggering six years of double-digit increases in housing prices during a period when the general inflation rate was low.
- What does it mean?
- If this crisis proves nothing else, it proves you cannot help people by lending them more money than they can pay back. [1]