The 2008 Housing Crisis A Brief Overview of Causes Essay...

The 2008 Housing Crisis: A Brief Overview of Causes In 2007, the U.S. fell into a deep financial recession. One of the main causes of this was the bursting of the housing bubble, which lead to a housing crisis. What is a housing bubble? A housing bubble is defined as â€Å"a temporary condition caused by unjustified speculation in the housing market that leads to a rapid increase in real estate prices† (businessdictionary.com 2014). When the bubble bursts, the result is a quick decline in home prices (businessdictionary.com 2014). In the U.S., a housing bubble began to emerge just after the turn of the 21st century. In these years, the economy was in great shape, interest rates were low, and consumers were ready to buy, which drove up real†¦show more content†¦Credit cards were not common during this period. First appearing in 1950, these were used mainly by the wealthy for convenience instead of carrying cash or a checkbook (Durkin Price, 2000, p. 624). During this time period, homeownership typically required a 20 percent down payment (Melicher Norton, 2014, 168). Lending institutions were very careful about whom they lent money to, and credit standards were high (Melicher Norton, 2014, 168). Melicher Norton (2014) called this the â€Å"save now, spend later† philosophy, and it would change in the coming years (p. 168). Attitudes about spending changed drastically. At this point, more people had access to credit cards because credit card companies stopped limiting their customer base to the wealthy, and began issuing cards to people with moderate to low incomes (Garon, 2012, CNN World). This gave Americans a way to purchase goods and services immediately, even if they didn’t have the cash on hand. The seven to eight percent savings rate maintained in the United States from the 1960s to the 1980s plummeted to less than two percent, and remained so until the first decade of the 21st century (Melicher Norton, 2014, p. 168). Lending institutions also saw a change. In the 1990s, the federal government desired more people to own homes in the United States and lenders were urged to make home loans more attainable for a wider consumer base (Melicher Norton, 2014, p. 168).Show MoreRelatedFinancial Crisis 20085972 Words   |  24 PagesFINANCE THE GLOBAL FINANCIAL CRISIS 2008 Group’s member:Nguyá »â€¦n NhÆ ° Nam (C)Phan Thu AnNguyá »â€¦n Thà ¹y DungHoà  ng Bà ¡ SÆ ¡nNgà ´ Thá »â€¹ à nh Tuyá º ¿tDate: 28/11/2014 | AbstractIn 2008 the world was fell into the worst financial crisis since the Great Depression of 1929-1933. Although this crisis has gone, however, its consequences for the economy of many countries is very serious, even now many nations are still struggling to escape difficulty. 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