Determinants Of House Prices In Central And Eastern Europe - Research Paper Example

The outcome of the research is the validation of the negative impact of the recession on the house prices. The trends in the house prices are signaling slow recovery and difficult challenges that lie ahead of all participants of the market.Since 2007, U.S is drowned in the financial crisis which is labeled to be the worst kind experienced since the Great Depression 2003 by many of the economists. The financial crises have become the main reason for the downfall of financial institutions, the collapse of stock markets and massive negative effect on house market leading to failure of the key businesses, reduction in consumer wealth and application of unsuccessful Government policies.

The immediate cause of financial crisis has been blamed on housing bubble which picked up the pace in 2005 to 2006. However, the real estate cannot be entirely blamed because it is the banks that played a major role in promoting the housing bubble. Since decades there has been a trend in the U.S that financial institutions mainly banks utilize the savings of businesses and households while giving out loans or making investments. The major part of peoples saving is used to provide loans to families to purchase houses or to fund businesses for their inventories or employee salaries.

The financial institutes in the U.S. gather funds for companies by selling bonds to investors then they use the money to invest somewhere more productive.The U.S always attracted savings and investment not only from within the country domestic resources but also from international sources. For the past 15 years, the U.S and many other European industrial countries have been receiving a large amount of foreign saving from developing countries of Asia where incomes are rising but consumption is low.