911 Real Estate Essay

2303 words - 9 pages

"bubble" and collapse 1"Bubble" and Collapse of the Real Estate MarketXin Zhou, JoyceThe University of Indianapolis"bubble" and collapse 2AbstractThere are several times of "bubble" and collapse of the real estate market happened in the recent and current years. Before 9/11, more than 50 percent of all the mortgages were made to home- buyers who were at or below the median income, and it led to "bubble". After 9/11, GDP growth decreased and the unemployment rate increased, and the housing bubble burst. After 2001, the U.S. government used long-term low interest rates, which led to excess liquidity in the market. Money became nowhere to go into the real estate market, blowing a huge bubble. Current state of the real estate market seems get better, it is still hard to predict.Keywords: real estate, bubble, 9/11, government, market"bubble" and collapse 3Through the 1990s and into the 2000s, "the Department of Housing and Urban Development raised the quotas seven times," so that in the 2000s more than 50 percent of all the mortgages Fannie and Freddie acquired had to be made to home- buyers who were at or below the median income. To make mortgages affordable for low-income borrowers, Fannie and Freddie reduced the down payments on mortgages they would acquire. "By 1994, Fannie was accepting down payments of 3 percent and, by 2000, mortgages with zero-down payments. "Although these lenient standards were intended to help low-income and minority borrowers, they couldn't be confined to those buyers. Even buyers who could afford down payments of 10 to 20 percent were attracted to mortgages with 3 percent or zero down."9/11 Attack" reduced real GDP growth in 2001 by 0.5% and increased the unemployment rate by 0.11%. Many people shifted stock market money into real estate because of the uncertainty. Now there was concerned that the housing bubble would burst, as it surely must in some overpriced market where average people could no longer afford starter homes.After 11/9, 2001, the U.S. government has taken a monetary easing monetary policy, a significant reduction in interest rates, increase the money supply in order to alleviate the terrorist attacks and the New Economy bubble burst impact on the economy, while allowing the"bubble" and collapse 4continuous depreciation of the U.S. dollar. This series of monetary policy operations indeed played an effect. However, the U.S. economy get better from recession in a short term, while its side effects are increasingly apparent, the U.S. property market increasingly active, and then rose rapidly, there have been similar to the stock market's "irrational exuberance." situation. "In 2000 -2005 years, the rise in property prices in many cities in the United States more than 100%, with middle-income ratio and the ratio of house prices and rental prices have reached the highest level in history. " Accelerated rise in the low interest rates to stimulate after 9.11, house prices continued to rise little more than 10...

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