From the course: Economic Tips for Everyone
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What is a housing crisis?
- A housing crisis is horrific. People lose their homes. Others who don't lose their homes, still see the value of their homes fall and their wealth erode. Plus, because people see their wealth drop, consumer confidence and financial markets can fall too. The good news is that housing crises are relatively rare, even though there can be long lived economic impacts after a housing crisis. One of the most familiar examples was the US housing crisis that caused the 2007 to 2009 recession. Following a collapse in housing prices and home sales, housing credit tightened and it slowed economic recovery. And why was housing credit tougher to get? Well, banks want to lend money to people who will pay back their mortgage loans plus interest. They don't want to lend their money to people who can't afford their mortgages and necessitate foreclosure. This basic dynamic of the banking business offers insights into the future of credit.…
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