the housing market
DESCRIPTION
The Housing Market. Dr. Pantuosco. The Housing Boom. From 2001-2007, home values rose by 50 percent. Credit Policy. Since housing prices were constantly increasing, banks began to loan money for houses to people who could not pay it back. Bundled Loans. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/1.jpg)
Dr. Pantuosco
![Page 2: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/2.jpg)
From 2001-2007, home values rose by 50 percent
![Page 3: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/3.jpg)
Since housing prices were constantly increasing, banks began to loan money for houses to people who could not pay it back.
![Page 4: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/4.jpg)
In order to receive more money to make loans, the banks would then package the home loans and sell them to investors.
This would provide them with money so that they could make more risky loans.
![Page 5: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/5.jpg)
Since so many people were buying houses for high prices, construction companies built as many houses as they could.
Each house they sold was extremely profitable.
![Page 6: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/6.jpg)
With all their money going to housing, people stopped accumulating savings in the bank.
Also, the price of goods was increasing due to inflation.
![Page 7: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/7.jpg)
When housing price began to fall, the whole system began to unravel.
Many people owed more money for their house than the house was worth
Ex. House is worth $100,000 Family owes $140,000 on the house
The family leaves the house and lets the bank
have it because they cannot pay the difference
![Page 8: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/8.jpg)
The investor who bought the bundled loan from the bank is the one who is stuck with the loss.
They now own the houses that are worth less than they originally paid for the investment.
Ex. The investor paid $1,000,000 for the loans.
They now own the houses associated with the loans that are only worth $800,000.
![Page 9: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/9.jpg)
The problem arose from greed. People wanted houses they couldn’t
afford. Banks wanted to make more money
without considering risk.
![Page 10: The Housing Market](https://reader036.vdocument.in/reader036/viewer/2022062315/56816001550346895dceffff/html5/thumbnails/10.jpg)