The Burst Of The Housing Bubble
There are always going to be good times and bad times that we experience throughout our lifetime
. This is especially true when it comes to the economy and if you have been alive for more than a couple of decades, you certainly have seen your share of good times and bad times. This is especially true when it comes to the economic bubble and in particular, the way that it affected the housing market. What is the housing bubble and what kind of changes did it cause for people in the United States and around the world?
The housing bubble is something that was experienced in the early part of the 21st-century. Housing prices rapidly grew and peaked in early 2006. During 2006 and 2007, a decline was seen in the pricing of houses and it reached a low in 2012. This is no small drop in housing prices, many people were seeing the values of their home go down to a fraction of what they were in 2006. Of course, this had repercussions for many people who were homeowners or who may have refinanced their home during the housing bubble to get some cash for one reason or another. What were those problems?
One of the obvious problems that occurred when the housing bubble burst is the fact that foreclosure rates grew very rapidly. People started losing their homes quickly, particularly those that got home loans which ballooned after several years. They may have been able to afford their mortgage when they first signed the documents but when they ballooned to the higher payment, they quickly got behind on their mortgage and were unable to afford it. This not only made it difficult for people to keep their homes, it also made it very difficult for the entire economy. After all, it impacted every aspect of the economy, including homebuilders, real estate agents and even hedge funds on Wall Street.
Of course, there was a lot of backlash within the loan industry during that time as well. It was no longer an easy thing for creditors to simply write up some documents and hand out money for homes, it was now necessary for them to tighten up their loan portfolio management and to take further measures, such as a more stringent credit risk analysis for each and every loan that came through their office. There was even a time when a freeze was put on all lending, which really had a negative impact on the entire country.
Although most people were hopeful that the current housing market is going to make a turn, it is unlikely that we are going to see the numbers that we saw at its peak in 2006 anytime soon. Many people that are upside down in their mortgage are going to continue to be upside down, leaving them very few options but to continue to pay their mortgage or to short sale their property. At the very least, there is hope that the crisis will bottom out and that we will see a turn to the better in the near future.
by: Frank Shields
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