The Housing Market Crash Of 2008 And Its Effect On The Real Estate Industry Today Research Papers Examples

Type of paper: Research Paper

Topic: Banking, Estate, Market, Real Estate, Commerce, United States, Business, City

Pages: 3

Words: 825

Published: 2020/11/21

Introduction

In recent years, the acquisition of real estate in the United States is becoming one of the most profitable ways to invest money. This is largely due to the general rise in price of life. Talking about the development of the housing market and its subsequent reduction in price justified only by half. Houses do build, but the price per square meter is not downward, but in a completely different opposite direction. Among the many options for investing in housing the most profitable and financially attractive considered buying a property in the United States. There are several reasons. Firstly, the US real estate as compared, for example, with the European looks most attractive in financial terms. Housing is much space for its construction, too. In Europe, especially in small countries, on the contrary - every square meter counts. This is despite the fact that transatlantic quality is not worse, and often even better than the European.
It is also worth noting that after the subprime mortgage crisis in 2007-2008, real estate prices in the US fell, which is an added plus. In the years of sustained economic growth in California annual house price growth was 10-15%. Moreover, it is a minimum, and in fact took place here and sharp price hikes - up to 30% per year. This situation was typical for the whole of America, and is likely to happen again, after the release of the US economy out of recession. As you know, buying a property in the United States opens its owner great prospects. In addition to the main opportunity to live in it, the US real estate is the perfect place to make money. There are many ways to get from her profit: renting, home repairs with its subsequent sale. You can combine business with pleasure - to buy a house or apartment and living in it, gradually to repair. The overall increase in housing prices and provide repair produced a significant increase in the price of your property. It is worth mentioning one more obvious advantages of buying real estate in the United States. States - one of the richest countries in the world, a young and steadily developing country, whose structure is designed and excludes various risks.

Body

In 2007 the era of "bubble" has ended and the market, reaping the consequences of buying fever, entered the phase of the crisis. Start this crisis has been given in the summer of 2007, and it began the collapse of one of the oldest US investment banks - Bears Stearns. In order to somehow save the situation, the Federal Reserve (the US central bank) was forced to guarantee to depositors payments on credit obligations of the bank. Simultaneously with the fall of the company, following the domino effect, the US credit market and one of its basic parts - Mortgages - began to crumble like a house of cards. Because of the high interest rates issued by the so-called "floating interest", a growing number of homeowners are feeling the difficulty with mortgage repayments and put their house up for sale. The proposal was to exceed demand, and property owners, unable to get rid of it on the open market, have become forced to leave their homes to the borrower, thereby initiating the procedure of foreclosure.
It is interesting to see in what US cities real estate prices have fallen to a greater extent. Cities, which entered the top ten, become Las Vegas, Nevada, Miami, Florida, Detroit, Michigan, Phoenix, Arizona, then five cities "gold" of California - Riverside, San Diego, Sacramento, Anaheim and Los Angeles - and Florida Neypel. House prices in these metropolitan areas continued to fall in 2008, and the loss of their value ranged from 14 to 20%. What was the cause of this crisis? First of all, real estate prices in the above cities in recent years have grown mostly not due to the increase of income and population growth in these cities, and thanks to the dominant speculative trends in the property market in these regions. In Detroit, the capital of the US auto industry, the reason for the fall in prices has been a marked decline in the population of the city due to layoffs in the US auto giant General Motors, Ford and Chrysler.
However, not all the rise in prices was caused by speculative trends. For example, in the Atlanta real estate prices was rising due to a significant increase in the population of the metropolis. Starting with the hundredth anniversary of the Olympics in Atlanta in 1996, the real estate market in the city began to develop at a faster pace. Having in his credit the world's largest airport, an extensive network of high-quality roads, the latest telecommunication system, soft and warm climate, a lot of vacant land for development, quality of life and affordable housing, Atlanta last decade has added an average of about 150 thousand people annually. Pace did not grow any city in the United States during this time. Nevertheless, financial fraud in the mortgage market and the real estate market forced Atlanta to feel sizeable drop in prices. Atlanta led by US cities by the number of foreclosures, i.e. homes that have fallen into the ownership of banks and sold on the market well below their market value (20 to 40%).

Conclusion

One should not exaggerate the complexity of the US economy. US have no time to prove that they are able to "punch". And the recession - it is unpleasant, but necessary and normal stage of economic development in any country with a free economy.
The proof of the attractiveness of investment in US real estate is that foreign investors directly and through investment funds have been actively buying up US real estate, trying to earn as much as on the purchase of undervalued property, and the inevitable strengthening of the US dollar in the near future. According to the National Association of Realtors USA, about 30% of purchases of real estate by foreigners are made for cash that the liquidity crisis in the United States allows to enter into transactions with US banks on more favorable terms. So it time to buy up America? The question is rhetorical. To answer this question, it is necessary to see offers of US banks willing to get rid of the mortgage property. Often, banks are willing to part with any real estate for half the price of its market value. We can only make the right choice.
It should be noted that many analysts are optimistic about the future of the US housing market, which is the spring of 2009 already began to show signs of recovery. Opinion optimistic analysts is that buyers check the market and waiting for more favorable time to buy, that is, there is a demand in the market, just set aside. Analysts, though pessimists and expressed concern that the current situation may persist for quite a long time, still talking about the restoration of former position in the US real estate market within 2-3 years.

References

Patterson, Laura A., & Koller, Cynthia A. Koller (2011). "Diffusion of Fraud Through Subprime Lending: The Perfect Storm." In Mathieu Deflem (ed.) Economic Crisis and Crime (Sociology of Crime Law and Deviance, Volume 16), Emerald Group Publishing Limited, pp. 25–45.
Koller, Cynthia A. (2012). "White Collar Crime in Housing: Mortgage Fraud in the United States." El Paso, TX: LFB Scholarly. ISBN 1593325347. ISBN 978-1593325343
Holt, Jeff. "A Summary of the Primary Causes of the Housing Bubble and the Resulting Credit Crisis: A Non-Technical Paper". 2009, 8, 1, 120-129. The Journal of Business Inquiry. Retrieved 15 February 2013.
Charles W. Calomiris; Stephen Haber (2014). Fragile by Design. Princeton University Press. pp. 216–226. ISBN 978-0-691-15524-1.

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