The complexities of the economics around the 2008-09 recession are many. One of the causes of the recession was the collapse of the housing market a couple of years before. Within this segment there were many factors that led to the collapse, but there are a few major components we'll look at here.
One of the factors was caused by speculation. People were buying homes on the anticipation that prices would increase in the future, but never counted on what would happen if they didn't. While real estate will never decrease to have zero value, it does fluctuate. House flippers also found themselves holding properties that were losing value. They had gambled that they could fix up the properties and turn them around quickly enough. Some were successful, but some weren't.
Another factor in the crash was that people were carrying too much debt overall. Housing was taking more of income as a percentage than ever before. People were able to get into homes for little to no money down. That left them having to finance the entire amount of the home's value.
These subprime borrowers ended up not being able to continue to make their payments, and so they defaulted. With their homes in foreclosure, the real estate market was now flooded with inventory. Too many homes made home values plummet further, and the spiral continued.
Tied into the financing fiasco was a flexible interest rate. This is a fine plan for when interest rates are low, but if they climb, so does each month's mortgage payment. It's a gamble to be certain, and it led to people having to make huge payments. Those payments were also on homes valued at less than the loan amount, or "under water".
Now real estate investors from the outside were pulling out of the market, too. Those who were still in were facing banks asking for collateral, having been burned by non-backed loans. Those investors who didn't have collateral sold assets in ฝากขายคอนโด order to have some, and this made the market even more flooded.
It's hard to keep calm and carry on when things are spiraling out of control. Those who held on were able to recover their investments, but it took a long time to realize this. It requires overcoming emotions and the tendency to try to control situations. We are typically risk-averse beings, so investing in the long term really goes against human nature. But, after every crash comes a recovery.
There were also external factors, too, though not to the same degree. Hurricane Katrina destroyed several cities in the Gulf Coast, and those areas took a long time to recover economically. With houses destroyed and incomes lost, many people fled the area and never returned. That loss of people translates to a loss in the tax base, not to mention the damage done to the real estate market both physically and financially.
The downturn in the housing market in 2006-07 that led to the recession was due to a number of factors. The ones described above are the major factors, but in reality, it was the perfect storm of events.
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