Americans would agree that the 2007 housing crash was the worst in U.S. History.
The crash began when Freddie Mac declared they were no longer doing
business with risky subprime (poor credit history) borrowers after too many lenders
were giving loans to people who couldn’t afford to pay back the money. This leads to a
worldwide credit crunch resulting in no subprime loans being available. Subprime
American Home Mortgage files for bankruptcy–this was the start of the market crash
3 Million home buyers forclosed on their homes with unemployment rising above
10% leading to the worst recession since the 1980s. With lenders not lending and
buyers not being able to buy; sellers can’t sell, which then leads to a crash.
In Sept of 2008, the U.S. treasury took over both Fannie Mae and Freddie Mac,
along with its 5 Trillion dollars in mortgages (DeGrace). Fannie Mae and Freddie Mac
were placed into conservatorship by the director of FHFA (Federal Housing Finance
Agency) to be under the control of the FHFA. U.S. Treasury Secretary Henry Paulson
spoke out about the conservatorship of the two Mortgage companies. Henry stated “that
conservatorship was the only form in which I would commit taxpayer money to the
GSEs.” He further explained,”I attribute the need for today’s action primarily to the
inherent conflict and flawed business model embedded in the GSE structure, and to the
ongoing housing correction,”(Paulson).
Meanwhile this was going on, families were being pushed further into debt.
People were living off of their credit cards because of job layoffs. Credit scores were
being damaged as a result of the overuse in credit that couldn’t be paid off. Collection
agencies dinging hard working Americans who were trying to stay above water, but with
their credit ruined any chance of buying a home was destroyed. Any chance of a home
loan was done with extensive research by the lender and the borrower cutting through
red tape. Houses were being foreclosed and homes couldn’t be bought without loans,
many abandoned houses were left to decay.
Now let’s lead into 2014, there are plenty of reasons to be down on housing.
Affordability declined over the past year, and it’s hard to get a loan. Young families aren’t
buying many houses. A low number of homes available for purchase has been
constraining sales, (Mantell). Here’s one important reason for optimism: Employers are
picking up hiring. “If people are working and not afraid of losing their jobs, they are more
likely to make a commitment to obtain a mortgage,” said Nicolas Retsinas, senior
lecturer in real estate at Harvard Business School. “As the broader economy rebounds,
that gives tailwinds to the housing market,” (Mantell).
The housing market is still far from ideal. More work is needed to be done before
we can exhale a sigh of relief. Foreclosed homes are starting to be lived in; meanwhile,
construction of new homes are being postponed. “Let’s fill up the houses we do have
before building new ones!” With that, many homes are being remodeled, so
homeowners’ home’s value may go back up again. Sites like http://
homeowner’s bring their homes back to life and give abandoned houses a chance to be
homes. Let’s get our neighborhoods back.
DeGrace, Tom. “The Housing Market Crash of 2007 and What Caused the
Crash.” Stock Picks System. N.p., n.d. Web. 08 Nov. 2014.
Mantell, Ruth. “Why the Housing Market May Bounce Back.” MarketWatch. N.p., n.d.
Web. 09 Nov. 2014.