Foreclosure Crisis Hits Hard in Brooklyn

By Andrew Cho



News clip talking about how the housing crisis is affecting Brooklyn, NY.

Revamping the Housing Industry

By Andrew Cho

With the housing market in turmoil, it is only time that a new policy is formed. It has been stated that the current policy put too much faith in subsidizing borrowing, and was the catalyst to the current state of affairs. In a revamped way of thinking, the American Enterprise Institute argues that "the federal housing policy should ensure that our poorest citizens are able to live in decent housing."

In order to fix the problem of housing for the poor, it is best to provide more housing vouchers and not costly tax programs. The current system makes the mistake of trying to apply the same rules everywhere. It subsidizes new housing in areas that already have plenty of cheap homes. Borrowing subsidies do little good when housing supply is constrained. In markets with limited supply, credit subsidies push up housing prices, and make housing less, not more, affordable.

The current housing price slump shouldn’t disguise the fact that homes in San Francisco and New York remain extremely expensive by historical standards. Prices are far above construction costs because robust housing demand, fueled by rising economic productivity, has collided against barriers to supply, like minimum lot sizes and height limits.

References:
http://economix.blogs.nytimes.com/2008/12/16/two-ways-to-revamp-us-housing-policy/?scp=1&sq=housing%20crisis%20&st=cse
http://www.nytimes.com/2009/02/19/business/19housing.html?scp=4&sq=housing%20crisis%20&st=cse
http://topics.blogs.nytimes.com/2009/02/27/seeking-solutions-to-americas-housing-crisis/?scp=6&sq=housing%20crisis%20&st=cse

Sub-Prime Mortgages; the cause of the Housing Bubble Burst

February 3, 2009
By Sarah E. Horner

It is clear that the United States economy is facing tough times. This economic recession can be traced back to a number of different events, however Manav Tanneeru in his article entitled, “How a ‘Perfect Storm’ led to the economic crisis,” argues that perhaps the most prominent reason for the economic decline is due to the housing bubble.

Tanneeru points out that during the mid 1990’s, real estate was a rather sturdy investment, however then, after 1999, housing prices raised by an astounding 6% and has been increasing steadily since then. In order to fight these rising rates and the recession that was starting to set in the early 2000’s, the Federal Reserve began to slash interest rates. This made it very easy to borrow money and very easy for people with bad credit or poor financial history to buy a home.

For a while, everything was fine, people were paying their mortgages so lenders looked the other way at these sub-prime mortgages. However, with the onset of the recession, people started to lose jobs, interest rates rose once again, and housing prices went up. This is when people began to default on their loans and the foreclosures began to flood in.

In December home sales did rise an impressive 6.3% perhaps marking a turnaround in the recent housing bubble burst, however there are still way too many people experiencing foreclosures and now bankruptcy, and the real answer to the housing bubble problem is no where in site.

Sources:
http://www.cnn.com/2009/US/01/29/economic.crisis.explainer/index.html?iref=newssearch

http://money.cnn.com/2009/02/03/real_estate/December_pending_home_sales/index.htm

http://www.brookings.edu/papers/2008/11_orgins_crisis_baily_litan.aspx

How the housing crisis happened?

Housing Crisis

Written by: Liwin Troy Lee

The most prominent players in the Housing Crisis were the real estate agents, lenders and the unqualified buyers. The problem was real estate agents who showed and sold homes to unqualified buyers. In order to close the deal, they referred these buyers to lenders. The loans were offered at low interest rates at first and later on the interest rates increased. As a result, with higher interest rates, buyer could no longer afford to pay the money back. Furthermore, it did not help when the prices of the houses feel and the buyers wound up having to pay more for the homes than they were worth.

The end result is the homeowner has to go into foreclosure, which is when the buyer cannot pay the moment back to the lender and the lender, usually a bank sells the home. Going into foreclosure hurts the credit of the buyer and make the lenders lose money. The reason being lenders cannot sell the home in a weaker housing market. Investors also lose money when they do not get a return on an investment they thought was low risk.

The best way to prevent another housing crisis in the future is inform the buyer of the interests rate of the loan and lenders should not lend money to them if they think the buyer cannot pay them back. Investors also need to be inform about the buyers ability to pay back and should get more return if there is a high risk of buyers not being able to pay back.

http://www.becker-posner-blog.com/archives/2007/12/the_subprime_ho.html

http://www.azcentral.com/business/articles/2008/09/16/20080916biz-CreditCrisisEvolution0724.html

http://www.businessweek.com/investor/content/jan2009/pi20090122_049663.htm