HOUSING CRISIS USA

(2006-2009)

PRESENTED BY:
• Lakshay Tokas 188025
• Umesh Sharma 188005
• Mohit Kapoor 188026
• Shubham Tongar 188035
• Luv Sachdeva 188002
• Gaurav Kalra 188046
• Jaskaran Singh 188029
 HOUSING BUBBLE
 A housing bubble is a run-up in housing prices fuelled by demand,
speculation and exuberance. Housing bubbles usually start with an
increase in demand, in the face of limited supply, which takes a relatively
extended period to replenish and increase. Speculators enter the market,
further driving up demand. At some point, demand decreases or
stagnates at the same time supply increases, resulting in a sharp drop in
prices and the bubble bursts.

 A housing bubble is a temporary event, but it can last for years. Usually,
it’s driven by something outside the norm such as demand, speculation,
high levels of investment all of which can cause home prices to become
unsustainable. It leads to limited supply versus an increase in demand.
According to the International Monetary Fund (IMF), housing bubbles
may be less frequent than equity bubbles, but they tend to be twice as
long.
 HOW THE BUBBLE FORMS

1. Housing prices goes up because demand goes up.

2. Housing bubble usually starts with an increase in demand,
in the face of limited supply which takes a relatively long
period of time to replenish.
3. Speculators enter the market, believing that profits can be
made through short term buying and selling of houses or
properties.
4. This further drives demand.
5. The increased demand further leads to increase in supply to
fulfil the demand.
6. The prices of houses drops because of excess supply.
 PRIME AND SUBPRIME LOANS

PRIME LOANS

These are the loans that are offered to borrowers with good credit histories
and carry lower interest rates as compared to subprime loans.

SUBPRIME LOANS / SUBPRIME LENDING

Subprime lending or subprime loans that are offered to borrowers with late
payment histories, defaults in credit, bankruptcies. These loans carry a very
high interest rates.