Real Estate – The Great Meltdown!

Real Estate – The Great Meltdown!

What really caused the housing collapse!

We’ll go back to the year of 2001, the stock market was trending down. September came around and a group of radical muslims decided to try their hand at renovating tall building structures. This tragic day became the worst terrorist attack on U.S. soil ever! Thousands of innocent people died!

The stock market…

The stock markets were closed until September 17th, 2001. Majority of traders knew the market was going to collapse. The market opened and plummeted over a 1000 points. Traders lost billions upon billions of dollars. The market declined for about a week straight. Individual retirement accounts were getting wiped out! Mutual fund companies were losing hundreds of billions of dollars. Most people don’t know, mutual fund companies are prohibited from shorting the market and profiting from a decline in the market, their charter specifically prohibits this.

We want our money back…

The people started redemptions on their retirement accounts. The market was heading for disaster. This horrific terrorist attack pushed this country back into a recession after showing some signs of life after the great market collapse and recession of 2000.

Irrational Exuberance…

Then, “Mr. Irrational Exuberance,” AKA Alan Greenspan started the protocols to try to stimulate the economy by lowering interest rates. Lowering interest rates are a effective measure of stimulating the economy by making lending to individuals cheaper thus causing consumers to borrow and spend. Consumer spending accounts for 75% of the economy. Without consumer spending, the economy comes to a standstill!

Market decline…

Since the people were badly burned by the stock market collapse they were looking to put their money into something much safer than the market. Loan rates were low, people started to invest into real estate. Housing prices started to rise due to supply and demand.

Birth of the bubble…

As housing prices were rising, people were seeing their home equity increase. People started to feel good and with home equity loan rates being low, people started to go on shopping sprees. They believed since their home price was rising quickly it would be easy to sell their home and purchase another home, hopefully at a good price. In the process they could acquire some nice toys along the way.

Easy mortgages…

Rates remained low, banks were forced by various organizations to ease lending requirements so everybody virtually could buy a home wether they could afford it or not. Thousands of brokerage firms were popping up to get in on the action. Mortgage requirements were so low, commercials were playing everywhere, they were claiming, “Show us a pay stub and we’ll get you into a house.”

Let’s get creative…

These brokerage firms were coming up with all kinds of creative financing. You could purchase a home, 0% interest, they really pushed the adjustable rate mortgages (ARM’s). People were buying it hook line and sinker! Looked like home prices were going to the moon! People believed they would be rich in no time due to the rapid appreciation of home prices. They continued to shop and shop.

ARM’s, no not yours…

People never realized the repercussions once the ARM’s would take effect. In the meantime, Greenspan made the fatal mistake keeping interest rates low for too long. Policy has always been, once the economy starts to heat up, the interest rates will be increased to slow the economy and keep it in check. All the signs were there for a long while and still, Greenspan kept rates low.

Gentle Ben…

Greenspan stepped down as Federal Reserve Chairman on February 1st, 2006 and was replaced by Ben Bernanke. Bernanke in my opinion, was a very bad choice, but this is a story for another time. Mr. Ben failed to admit a housing bubble existed!

The peak…

Housing prices peaked in 2006 and interest rates started to rise. Approximately 80% of the sub-prime mortgages were ARM’s. As interest rate continued to rise, refinancing became more difficult. People were stuck with the ARM’s and they began to reset to higher rates which people couldn’t afford. Mortgage defaults began to rise.

Bank problems…

Securities backed with subprime mortgages, widely held by financial firms, lost most of their value. The result was a large decline in the capital of many banks and U.S. government sponsored enterprises. This forced them to tighten credit around the world. This further exacerbated the mortgage defaults.

Damage…

The damage has been done! We experienced the largest home ownership in the history of this country. Never mind a majority of the home owners had no business owning a home in the first place! Times were great, so they thought!

Foreclosures…

Mortgage defaults were rising at an alarming rate. Foreclosures were on the rise. In July of 2008, a rescue bill was passed to slow the foreclosure rate. The U.S. taxpayers now had to help bailout all the people who thought they were entitled to own a home even though they couldn’t afford it! Of course, these people claim innocence and claim they were mislead. If you believe this, I have some prime property next to a sewage plant for sale!

Can I have one too?

If mortgage lenders would’ve stood firm on lending requirements and ignored the pressure of ACORN and the likes, the housing bubble would’ve never happened! Real estate would’ve remained the best and safest investment which made many hard working honest people wealthy! However in today’s society, people have this false illusion which they believe they are entitled to virtually anything regardless of the price and feel they are being discriminated if they can’t have it!

In closing…

The repercussions of this mentality will be felt for years to come. The housing market will take years to recover and the hopes and dreams of all the hardworking and deserving people have been destroyed. Most people have seen their home prices drop to ridicules levels while their mortgages don’t reflect the loss. Where is the justice?

The Seekers of Truth

Real Estate – The Great Meltdown

Some Videos On The Real Estate Bubble…

Thomas Woods explaining what caused housing collapse

Home Prices, Historical Data Chart – Glenn Beck explains the housing bubble, why prices must fall

Like I’ve been telling my friends for years, it’s a bubble stupid, it can’t last for ever. If the average young couple has to save money for 30 years just to buy their first starter home, then does that not tell you that something is wrong? Things we…

Mortgage Problems Explained

… by the CHAPS! 😉 web.archive.org 209.85.129.104 Appraisers Petition 2002 Concerned Real Estate Appraisers from across America Submit the attached petition (Which was posted on appraisersforum.com): To: Mr. Ben Henson – Executive Director Appraisa…

Additional Real Estate Bubble Info…

Wash Park Prophet: Calculated Risk on the Housing Credit And More

The proximate cause of the financial crisis was a housing bubble that collapsed in several regional U.S. housing markets. This caused the financial industry which had financed the bubble to choke, and this in turn led to a generalized, …

Publish Date: 07/21/2010 17:56

http://washparkprophet.blogspot.com/2010/07/calculated-risk-on-housing-credit-and.html

3 housing stories that’ll surprise you – FHA only starting to

Now some of you were under the impression that something was already done to tighten lending standards given the precarious situation the housing bubble brought to our economy. ….. It failed in 1929, and caused a decade of absolute misery for working people, while the rich generally did just fine. It surely failed in the decade of the 2000’s, as a bunch of infinitely greedy and corrupt lenders made housing loans to greedy and stupid buyers, which both knew could never …

Publish Date: 07/20/2010 3:31

http://www.doctorhousingbubble.com/fha-insured-defaults-spike-200-percent-bofa-deed-in-lieu-of-foreclosure-trend-fines-for-foreclosed-properties-3-stories/

Not a sheep: What caused the US housing bubble? (Also has UK

What caused the US housing bubble? (Also has UK implications). A comment on a Real Clear markets article really caught my eye and I repeat it here: ‘David+Driver Another Washington Dog & Pony Show. A sick patient lies in a hospital …

Publish Date: 07/09/2010 14:15

http://notasheepmaybeagoat.blogspot.com/2010/07/what-caused-us-housing-bubble-also-has.html

Some Tweets about the housing bubble…

@john_forte Greenspan may have been Cool Hand Luke, but he’s made some huge mistakes. Housing Bubble!

By Al_Letson at 07/22/2010 11:18

By _Flep_ at 07/22/2010 9:37

By GreatProperty at 07/22/2010 10:21

One Response to “Real Estate – The Great Meltdown!

  • What a video it is! Actually remarkable and nice quality, please upload more video clips having such pleasant quality. Thanks.

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