Fall of Housing Prices during subprime crisis during 2007-2008
* The fall or burst of US housing prices
* 1992-2006 households were willing to bid prices to the limit of affordability, so housing prices increased as income increased and interest rates decreased.
* However, in 2007-2008, housing demand drops and housing supply is inelastic → prices fell dramatically
* Result of default of payment
* Subprime borrowers couldn’t sell their houses at a higher prices than they paid for them
* Banks not willing to refinance when the home’s value was less than the mortgage → led to foreclosure.
Therefore, I would like to explore the Fall of Housing Prices during subprime crisis during 2007-2008: why this happened, what government did to reverse that trend, what lessons did we learn from it, and how can we do better in the future to prevent such scenario from happening again.
