The Real Estate Crisis Essay

It is often easy to castigate large cities or third world countries as failures in the field of affordable housing, yet the crisis, like an invisible cancer, manifests itself in many forms, plaguing both urban and suburban areas. Reformers have wrestled passionately with the issue for centuries, revealing the severity of the situation in an attempt for change, while politicians have only responded with band aid solutions. Unfortunately, the housing crisis easily fades from our memory, replaced by visions of homeless vets, or starving children. Metropolis magazine explains that “…though billions of dollars are spent each year on housing and development programs worldwide, ? At least 1 billion people

As we now know, the U.S. economy, the middle class, and its job growth was damaged by the overwhelming collapse of Wall Street, which was triggered by the downfall of the housing market and sub-prime loan defaults. One of the main things that need to be addressed in our economy today is the housing market and making sure that our banks and credit unions are not allowing people who do not have the necessary income to pay their mortgage disbursements. In an article entitled Thinking outside the Housing Bubble, the author John Vogel remarks how the economy is generally supported by the housing market. Vogel states:

The Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) were to central semi-public organizations that assisted buyers with qualifying for mortgages. The both the company failed during the year 2008 when they were left with no money and were bankrupt. Like every company they were unable to pay back the money and they were in the looking for the help of government via taxpayer’s money. Hence, after the bankruptcy of 2008, the government has utilized huge amount of the taxpayer’s money for not letting them to shutdown and recovering them.

“Most of the homes being abandoned and foreclosed will produce losses for the mortgage lender, which could add up to trillions of dollars and break the financial system before it is half repaired” (Zuckerman, 2008). These are the major reasons why the government should be thinking of a bailout for homeowners. If the government will not take action, then these losses will go past any bailout efforts of the government and it will be too late. By preventing foreclosures, it could bring a double benefit to the US economy and society. It would let families to stay in their homes and at the same time keep the housing market from getting out of control.

The foreclosure crisis that devastated our economy several years ago not only impacted the middle class wealth but also the upper class wealth. The upper class families who were not prepared for this crisishad to downsize their primary homes or utilize their investments and savings to keep their properties. The middle class families were hit the hardest during this crisis with losing there homes, depleting their life savings and investments. The middle class families who were forced to foreclose on their homes due to their loss of income and financial security moved into rental apartments or moved to a family members home to regroup from this crisis. Areas that may have added to foreclosures or short sales were the lost of many jobs due to a corporation downsizing of their employees, or the over appraising of a property if the property was appraised higher than the true value or what a buyer was willing to pay for the property. Homeowners were forced to sale their property at a lower price if the homeowner was in the process of a divorce, relocating for a job or foreclosing because they had fallen behind on their mortgage payments.I have seen circumstances where certain peoplelived above their means by spending more for a home or nonessential items like luxury vehicles they couldnot actually afford to pay.

It is evident that the housing deficit is just a layer of the many problems we are suffering from during the hard times in our economy. Foreclosure is indeed a horrific word that is haunting homeowners across the US. Because of the situation in the current economy, millions of Americans have been plagued by foreclosing on their homes and are left to find new location for themselves and their families to live.

was August, and I was seven months behind on the mortgage. The house had now gone into foreclosure, and on the twenty-eighth, it was going to be auctioned. Despite what that letter said, I still trusted God to perform a miracle. That letter did not faze me a bit. My faith was solid, and nothing or any person was going to shake it. After all, I was following the direction of the Lord.

In the gleeful times of 2005, my parents decided, like so many others, that it was time to “upgrade.” They sold our smaller home on the other side of town, which had appreciated nicely, and bought a 3700 square foot behemoth in a town with already exorbitant property taxes. My younger brother and I were thrilled to finally have a basement, our own rooms, and even a concrete basketball court in our backyard! All eight-year-old me knew was that things were going to be a whole lot more comfortable from there, and my optimistic parents seemed to think the same.

The insolvency seen in the Housing Market manifested in the large number of stagnant foreclosures caused a dramatic decline in housing prices, which resulted in many homeowners owing more money on their houses than they are worth. Market-level insolvency is caused by capital flight in a specific market in response to a scare during a decrease in solvency. During the scope of this recession, the initial, progressive decrease in solvency was caused by a negative Net Capital Outflow in conjunction with the cash-vacuum produced by the US Budget Deficit, and the scare was caused primarily by the failure of several significantly-sized corporations and a rapid increase in foreclosures caused by the loss of a large number of jobs.

As the saying goes, history repeats itself. The Great Depression is a time in American history that will always be remembered as a time of hardship in Americans’ lives. The goal: to never have such great oppression exist in the United States again. With the way the economy is headed today, many people are skeptical as to whether history will really repeat itself and create a new Depression. One of the biggest problems in the country today is the foreclosure crisis. Many Americans are living outside of their means or have lost their jobs and are unable to make their mortgage payments. When people can’t make their mortgage payments, they will lose their home and their family will be out on the streets. There are definite changes that need to

The burst of the housing bubble in the U.S., which peaked in 2004, led to a huge decline in value of securities that tied to U.S. real estate pricing. The effect caused massive damage to financial institution globally. These three factors including price appreciation in housing market, high growth of the private-label residential mortgage-backed security in the main fuel for the extensive growth of the mortgage market beginning in 2000. This section describes the fundamental factors, which are credit risk, liquidity risk, market risk, and operational risk, relating to the financial crisis between 2007 and 2008.

The Subprime Mortgage Crisis or so called “United Housing Bubble” is considered as the most serious recession after 1929. The crisis involved not only one or couple companies but the whole U.S. Financial and Real Estate industry. Furthermore, the crisis lead to millions of people in US lost their houses, or homes and several industry giants failed down like Lehman Brothers, American International Group, and Merrill Lynch and so on. The effect of the crisis influenced not only America but also the economics of the whole world in the next few years.

The United States economy has been in trouble for the past couple of years. The foreclosure crisis is a condition that began due to the inability of homeowners to pay their mortgages. Foreclosure is a legal proceeding whereby a lender obtains a legal termination of a debtor’s right to redemption. The foreclosure rates have been increasing for a considerable period and certain steps have been put into place to solve the problem. While the government, financial institutions and the general public are highly aware of the crisis, the steps taken to combat the problem are still not sufficient as the foreclosure rates are still increasing.

Interest rates have a major economic impact on the real estate market. Interest rates directly affect property sales. Residential property realizes the greatest affect as interest rates have a considerable influence on a homebuyer’s capability to purchase a new property. The customer is affected when there are significant increases or decreases in interest rates. Declining interest rates lower the costs of obtaining a mortgage; this in turn creates higher demand for homes, and pushes home prices up. Conversely, high interest rates increase the costs to obtain a mortgage; these increases lower the demand for homes, which creates a decline in home prices. (Stammers, 2016)

With more lost jobs on the horizon and fluctuating adjustable mortgage rates, the foreclosure crisis continues to plague America. A recent report from the Mortgage Bankers Association reveals that 14% of loans are behind or in foreclosure. This is largely due to lost jobs in this volatile economy. Many factors are involved in addressing a situation like this and one solution alone cannot solve the crisis. We saw millions of dollars in stimulus money go to lending institutions only to be left wondering why the problem is not going away.