History Of Housing Bubble
The house prices in the United States peaked in 2005. However, ever since they have been declining. While the exact reason for the housing bubble to burst in the US is not known, many experts say that a number of factors cause this cyclic event. |
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If you look at the history of the housing bubble in the United States, you will figure out that some of factors that caused it were as follows:
- Low interest rates encouraged borrowers to borrow more than they could afford
- Sub-prime mortgage was given to borrowers who were considered as high risk
- The income of the borrowers and the amount spent on housing were disproportionate
All these factors prompted the housing market in the US to flourish. Sales of homes were high as there were many potential buyers. In fact, based on statistics, there was an increase of 57 percent in the prices of homes over a period of 6 years prior to the housing bubble bursting. However, now it has come out that the number of unsold houses in the market is at a 13-year high. Even the builders are suffering. Their confidence is at a 15-year low.
The bursting of this housing bubble is the worst that the US has ever witnessed. Although the conditions for home sales were conducive, the downturn occurred. With this, the entire economy of the country was affected.
People rushed to buy homes even when they could not afford them. This was primarily because they were afraid that if they waited any longer, the prices would get completely out of reach. As a result, this pushed the prices of homes even higher resulting in the housing bubble in the US which ultimately burst and affected millions of people across the nation.
Sales were way off, profits were down and the lending institutions walked away from already-purchased options on land for future development.
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