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One of the most important factors in causing the 2005-2006 housing bubble was Allen Greenspan's decision to keep the Fed Funds rate at very low rates for a long time after the 2001 dotcom crash. This caused credit to be very loose, and helped people obtain loans and buy houses that they weren't qualified to have. It also caused housing bubbles elsewhere, especially in European countries. Spain and the UK were also hard hit.
Another important factor was the Democrat controlled congress passing laws that allowed and even encouraged people to buy loans. Both sides could see this bubble bursting. The start was decades earlier when Carter forced banks into making 10% of their loans in communities that didn't have people wanting to buy in with good credit. The Community Reinvestment Act forced banks to search for people to buy in these areas. A great idea for the areas, and a very bad idea for banks. Clinton, in 1996 removed restrictions on verifying legal income. This opened the door to even more bad loans in bad areas. To compensate for these bad loans, banks had to see larger interest rates. The previous limits to interest was also removed during the Clinton Presidency. The ONLY President to try to curb this issue was President Bush. He was shot down by the Democratically controlled Congress as being reactionary.
Wiki User
∙ 14y ago
Wiki User
∙ 13y agoSubprime mortgages offered to people who couldn't afford the payments.
Banks would give $200,000 dollar loans to people earning $30,000/year. The banks could also issue adjustable rate mortgages. The banks could then change the interest rates as they saw fit, making people unable to pay the monthly fees.
The bubble is caused when people have the false belief that real estate is an investment that will never depreciate. People thought they could buy a house for $200,000 and next year it would be worth $250,000 and they could then sell the house for profit. This caused many people to buy houses. When the Stock Market took a tumble, people panicked, and everybody sold their houses. This led to an increase in supply, which caused the price to drop.
Supply vs. Demand
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What was the 2007 crash of the US housing market was an example of?
the U.S housing market was an economic bubble affecting many parts of the united states of America houses peaked in 2006 and declined in 2007 to 2009 and new lows in 2012
Everythong held constant a decline in interest rates will cause spending on housing to?
FAll
What is the likely outcome of many people attempting to buy a small amount of goods?
The law of supply and demand would cause the price to skyrocket. "Tulip mania" occurred in the early 1600s, when contract prices went way, way up- and then suddenly collapsed. The event is considered to be the first recorded speculative bubble, or economic bubble.
Who Indian leader attributed population and poverty as the root cause of environmental degradationin in un convention in Stockholm?
Dr. A P J Kalam
Which is a determinant of the demand for housing?
Change in the expected future price of housing.
When did the housing bubble burst?
Greed.
What was Delaware type of housing?
delaware housing is made of bubble gum
How have bank mortgage rates changed since the housing bubble has burst?
Since the housing bubble burst, bank mortgage rates and decreased. This makes it more affordable for people to get a loan and be able to purchase a house.
What are three sentences for the word bubble?
She blew a huge bubble.The housing bubble burst. The ill boy lived in a bubble to prevent infections. Do you have any bubble gum?
What is the average cost of a house in 2002?
The average cost of a new home in January of 2002 was $187,600. There was a housing bubble in the United States that started in 1998. The bubble peaked in 2006. In 2007, the bubble burst.
Why soap bubble look multicoloured?
The cause is the interference of radiation with different wavelengths in the bubble.
What is the downside of increasing economic interdependence?
Economic interdependence can cause chain reaction such as the situation we are in right now. America's economy crashed due to the housing bubble and the other economys of the world crashed with America's.
Causes of housing problems?
the ROOT cause of housing problem is the OVERPOPULATION..why? because house is in the physiological needs of man and due to this the demands of house is raising and if they cannot afford to put up or there is no vacancy of location though you can afford to buy and established...
What is the root cause for the love?
The root cause for LOVE is SECURITY for living.
What causes transmission fluid to bubble?
IF you have over filled the transmission this will cause it to bubble, this could cause serious damage, drain and refill with the proper ammount.
Is dallas real estate affected with the us housing bubble?
The real estate of every city is affected by the U.S. housing bubble. Dallas hasn't been affected any more or less by this than other cities, so the whole country's in the same boat.
Will car shimmie with air bubble in tire?
It can be a cause.
