Essay on Analysis and Bursting bubble of Real Estate Mortgages and Loans

Introduction

The housing market crisis has become one of the major causes of the economic recession in the US and has provoked the large-scale financial and economic crisis in the US and global economy. At the same time, the bursting bubble of real estate mortgages and loans could have been predicted, if economists and financiers were not driven by the pursuit of maximum profits but invested in the housing market reasonably avoiding speculations and overheating of the market. At this point, it is worth mentioning the fact that the US housing market has suffered one of the deepest downfalls in its history and its negative effects still affect the US economy preventing the US from the fast recovery. Remarkably, many specialists (Latham & Braun, 2008) point out that the economic recovery in the US is possible only after the beginning of the recovery of the housing market. In such a situation, the detailed analysis of the housing market crisis is essential for understanding its causes and effects as well as for finding the ways of prevention of the repetition of similar crises in the future.

In fact, the bursting bubble of real estate mortgages and loans has revealed the full extent to which the contemporary economic system of the US and the world is vulnerable to speculations and unsteady development accompanied by numerous and regular crises, which put under a threat the stable development of the national economy and affect millions of people for whom the economic recession and the housing market crisis have become threats that put them on the edge of survival.

The crisis in the housing market as the major cause of the economic recession in the US

On analyzing the housing market crisis, it is important to place emphasis on the fact that this crisis has become the major cause of the economic recession in the US. At the same time, specialists (Elekdag, Justiniano, & Tchakarov, 2006) pointed out risks associated with the possible deterioration in the housing market and its negative impact on the economy of the US. To put it more precisely, specialists (Latham & Braun, 2008) predicted that the dynamically developing housing market in the first half and mid-2000s could have stopped and the decline of housing prices could have a disastrous impact on the national economy because the housing market involved substantial resources and affected banks and insurance companies along with the construction industry and construction-related industries. Nevertheless, in spite of a few predictions made by specialists (Latham & Braun, 2008), the housing bubble has burst in 2008-2009 affecting the aforementioned industries. In such a situation, the housing market crisis became the basic cause of the consistent deterioration of the economic development of the US.

More important, the housing crisis and bursting bubble of real estate mortgages and loans affected millions of people nationwide. In fact, many Americans ran bankrupt, while their homes were their major, if not to say the only, asset. In addition, many Americans have lost their jobs as the economic recession has started to aggravated as negative effects of the housing crises spread nationwide and affected other industries and branches of the domestic economy as well as international business.