The stock of housing in the UK includes privately owned and occupied houses and apartments, privately rented and local authority rented accommodation, and property managed by housing associations. Bythere were just over 27 million households in the UK As the chart shows, the significance of local authority housing has declined, while renting privately and through housing association schemes has increased.
This period also ranks among the most horrific in U. Those who lived through these events will likely never forget the turmoil. So what happened, exactly, and why? Read on to learn how the explosive growth of the subprime mortgage market, which began inplayed a significant role in setting the stage for the turmoil that would unfold just nine years later.
Unprecedented Growth and Consumer Debt Subprime mortgages are mortgages targeted at borrowers with less-than-perfect credit and less-than-adequate savings. An increase in subprime borrowing began in as the Federal National Mortgage Association widely referred to as Fannie Mae began a concerted effort to make home loans more accessible to those with lower credit and savings than lenders typically required.
The idea was to help everyone attain the American dream of home ownership. Since these borrowers were considered high-risk, their mortgages had unconventional terms that reflected that risk, such as higher interest rates and variable payments.
Learn more in Subprime Lending: Helping Hand Or Underhanded? While many saw great prosperity as the subprime market began to explode, others began to see red Economics housing market and potential danger for the economy.
Bob Prechter, the founder of Elliott Wave International, consistently argued that the out-of-control mortgage market was a threat to the U. In his book "Conquer the Crash," Prechter stated, "confidence is the only thing holding up this giant house of cards. Thus, ever-increasing mortgage default rates Economics housing market to a crippling decrease in revenue for these two companies.
Among the most potentially lethal of the mortgages offered to subprime borrowers were the interest-only ARM and the payment option ARMboth adjustable-rate mortgages ARMs. Both of these mortgage types have the borrower making much lower initial payments than would be due under a fixed-rate mortgage.
After a period of time, often only two or three years, these ARMs reset. The payments then fluctuate as frequently as monthly, often becoming much larger than the initial payments. In the up-trending market that existed from throughthese mortgages were virtually risk-free.
A borrower, having positive equity despite the low mortgage payments since his home had increased in value since the purchase date, could just sell the home for a profit in the event he could not afford the future higher payments.
However, many argued that these creative mortgages were a disaster waiting to happen in the event of a housing market downturn, which would put owners in a negative equity situation and make it impossible to sell.
You cannot be the wealthiest country in the world and have all your countrymen be up to their neck in debt. An MBS is a pool of mortgages grouped into a single security. Investors benefit from the premiums and interest payments on the individual mortgages it contains.
This market is highly profitable as long as home prices continue to rise and homeowners continue to make their mortgage payments. The risks, however, became all too real as housing prices began to plummet and homeowners began to default on their mortgages in droves.
Learn how four major players slice and dice your mortgage in the secondary market in Behind The Scenes Of Your Mortgage. Another popular investment vehicle during this time was the credit derivativeknown as a credit default swap CDSs. CDSs were designed to be a method of hedging against a company's creditworthiness, similar to insurance.
But unlike the insurance market, the CDS market was unregulated, meaning there was no requirement that the issuers of CDS contracts maintain enough money in reserve to pay out under a worst-case scenario such as an economic downturn.
This was exactly what happened with American International Group AIG in early as it announced huge losses in its portfolio of underwritten CDS contracts that it could not afford to pay up on. Learn more about this investment vehicle in Credit Default Swaps: An Introduction and Falling Giant: Market Decline By Marchwith the failure of Bear Stearns due to huge losses resulting from its involvement in having underwritten many of the investment vehicles directly linked to the subprime mortgage market, it became evident that the entire subprime lending market was in trouble.
Homeowners were defaulting at high rates as all of the creative variations of subprime mortgages were resetting to higher payments while home prices declined. Homeowners were upside down - they owed more on their mortgages than their homes were worth - and could no longer just flip their way out of their homes if they couldn't make the new, higher payments.
Instead, they lost their homes to foreclosure and often filed for bankruptcy in the process. Despite this apparent mess, the financial markets continued higher into October ofwith the Dow Jones Industrial Average DJIA reaching a closing high of 14, on October 9, The turmoil eventually caught up, and by December the United States had fallen into a recession.
By early Julythe Dow Jones Industrial Average would trade below 11, for the first time in over two years. That would not be the end of the decline. One week later, on September 14, major investment firm Lehman Brothers succumbed to its own overexposure to the subprime mortgage market and announced the largest bankruptcy filing in U.
The next day, markets plummeted, and the Dow closed down points at 10, This loss was due to the holding of commercial paper issued by Lehman and was only the second time in history that a money market fund's share value has " broken the buck.An analysis of the latest data and developments in Canada’s housing market.
October Monthly Housing Market Update September Monthly Housing Market Update August Monthly Housing Market Update July Monthly Housing Market Update June Monthly Housing Market Update. · The market performance gap decreased by an estimated 26, (SAAR) sales between May and June “The lack of housing supply is the primary culprit for the persisting gap," said Mark plombier-nemours.com · In mainstream economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information.
The exchange of goods or services, with or without money, is a plombier-nemours.com://plombier-nemours.com(economics). The Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market.
The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes. The stock of housing in the UK includes privately owned and occupied houses and apartments, privately rented and local authority rented accommodation, and property managed by housing associations.
· This is a revision presentation on aspects of the economics of the housing marketplombier-nemours.com