Essay on Timeline of the housing crisis

First precursors of the upcoming housing crisis and bursting bubble of real estate mortgages and loans have started to appear in the mid-2000s, although the first signs of the economic recession and upcoming crises in the housing market had not been obvious yet. At this point, it is worth mentioning the fact that the mid-2000s were marked by the consistent growth of sales and purchases in the housing market. Housing mortgages and loans grew substantially. Hence, the growth in the early and mid-2000s contributed to the growing speculations in the housing market, which became one of the most attractive markets for investments. In addition, it is necessary to take into consideration traditions of the US society because Americans believe that their homes are their assets and, what is more, the most reliable one. Therefore, the purchase of a home was perceived by Americans as a sort of insurance that granted home owners in the certainty in their future as well as in their stable financial position in a long-run perspective.

However, 2007 marked the market slowdown. To put it more precisely, the sales in the housing industry have started to drop that became the first sign of the upcoming crisis. In fact, the drop of sales in the housing market meant the beginning of the slowdown in the market. The slowdown in the market development was the result of the overheating of the market, which could be observed in the course of 2000s until 2007. Specialists (Latham & Braun, 2008) became more and more concerned with the possible deterioration in the housing market and the aggravating of the situation in years to come. Nevertheless, at first, the downturn in the development of the housing market in 2007 was perceived by the public as occasional (Latham & Braun, 2008).

However, 2008 proved that 2007 deterioration was just a starting point in the steep decline in the housing market. Housing prices kept falling provoking global stock market corrections and vitality in 2008. In fact, this meant the spread of negative effects of the deterioration of the situation in the housing market on other industries. The fell of sales aggravated the situation in the housing market and the panic has started to spread in the housing and financial markets. In addition, home owners could not pay their mortgages and bank loans remained unpaid that led to the consistent deterioration in the economic development of the US to the extent that the economic recession in the country became obvious.

At the same time, the fear of economic recession increased provoking the panic in financial markets not only in the US but also worldwide. At this point, it is worth mentioning the fact that the US economy was one of the leading economies in the world. Moreover, the process of globalization has made national economies closely integrated in the world economy. As a result, the deterioration of the economic situation in one country, especially such as the US, provoked the chain reaction and deterioration of the economic development in global terms. Therefore, the housing market bubble in the US affected not only the US economy but also the world economy and, in 2008, the economic recession has started to spread worldwide at an unparalleled pace.

However, 2009 marked the most profound decline in the housing market of the US making the economic downturn in the US irrevocable and severe. In fact, 2009 was the year of about 4 million foreclosures that was about 20% higher compared to 2008. 2.21% of all households were in some stage of foreclosure during 2009. This means that a considerable part of home owners could not pay their mortgages, while a large part of loans remained unpaid. Therefore, banks and insurance companies suffered substantial financial losses, while many Americans faced a threat of losing their homes and becoming completely homeless.

In 2010, the downfall of the housing market continued. In fact, specialists point out that prices nationwide fell 4.2% in the first quarter after declining 3.6% in the fourth quarter of 2010. Home prices, which slid in March to their lowest level since the start of the 2006-2009 downturn, have tumbled for eight straight months (Kalita & Timiraos, 2011). IN such a way, the downturn in the development of the housing market continued but the fall has slowed down. However, the ongoing deterioration of the situation in the housing market still affected the situation in the domestic economy and global economy as well.

Today, specialists predict that another 5% decline in prices will increase the share of underwater homeowners with mortgages to 28%, up from 23% at the end of 2010 (Kalita & Timiraos, 2011). In fact, in 2011 the downfall stopped at its bottom line and first signs of revival have started to appear. Nevertheless, the situation is still far from perfect and the economic crisis is just on its way to resolution, while the government and business has to implement consistent changes and improvement to start and to accelerate the economic recovery in the US.