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On a national level why describe why the Real Estate market crashed, what contributed to the crash of the market, is the market recovering, and what is contributing to the recovery - Research Paper Example

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Since 1997, the prices of houses started to increase until they reached a peak in 2006 (Garlett 45-52). During this time, annual increase in home prices in the United States was at…
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On a national level why describe why the Real Estate market crashed, what contributed to the crash of the market, is the market recovering, and what is contributing to the recovery
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Extract of sample "On a national level why describe why the Real Estate market crashed, what contributed to the crash of the market, is the market recovering, and what is contributing to the recovery"

Download file to see previous pages This aggressive marketing led to two negative factors. The first factor is that the demand/supply forces were affected in such a way that there was a false equilibrium, and thus the costs of the houses were so much overrated. The cost of a home in almost any state in the United States of America was overpriced by at least two hundred percent. As a result, the middle income earners could not afford to buy the houses with their income and the only way to buy a house was to secure a mortgage from a bank. As more and more people used mortgages to buy houses, the demand of the houses increased, only resulting to the further increment in home prices.
The other thing was that the mortgage providers failed to include due diligence while providing these mortgages. While these mortgage providers advertised strict terms and conditions, these terms and conditions were never applied when giving out mortgages and as a result, many people who were not eligible for such mortgages ended up in the client lists of such banks. When the demand /supply forces forced the interest rates of the mortgages to start fluctuating, most of these mortgage owners started finding it harder to finance their mortgages and some of them had to start refinancing their mortgages. This meant that they had to take a loan to pay their mortgage. In such an arrangement, the problem was that the mortgage owners ended up paying interests twice. This is because the mortgage owners would have to pay for the mortgage as well as the interests on loans.
The very fact that a majority of the mortgage owners were seeking refinancing for their mortgages meant that the real estate industry was already facing major problems. Most of these frustrated home owners started selling off their homes but at much lower prices than they had secured the homes, and the real estate market was flooded with supply. Those who could not afford to sell the ...Download file to see next pagesRead More
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