Before 2008, it seemed that although houses were not cheap, many people could buy a home and take out a mortgage, and that overall, everything would work out. Unfortunately, that was not the case during or after the housing crisis. Clearly, not everyone has a good credit history, so, if everyone is taking out mortgages, it stands to reason that not everybody taking out a mortgage has a good credit history. As long as people can pay back their mortgages, this isn't a problem.
As long as interest rates stayed low, paying back mortgages wasn't a problem for most people. Of course, there were exceptions, but it seemed that things were going pretty well. However, interest rates rose in 2008, which led to people not being able to pay back their mortgages. Because of this, people defaulted on their debts, which caused housing prices to drop, which caused people to default, and so on. Eventually, houses became cheap, but everyone who already had a house could not afford to pay their mortgage.
1 comment:
I think more analysis regarding the subprime mortgage market and the problems inherent to packaging adjustable-rate and subprime mortgages would have helped carry your point better.
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