Is the United States heading for another housing crash and absolutely devastating economic collapse? It has been 10 years since the last one, and so many of the exact same signs that immediately preceded the last economic crisis are starting to appear once again.
Back in 2007, real estate prices were absolutely soaring and it seemed like the party would never end. But interest rates went up, home sales slowed down substantially, and eventually the housing market began to crash. Millions upon millions of Americans were suddenly “underwater” in their homes just as a crippling recession hit the economy, and we plunged into a foreclosure crisis unlike anything that we had ever seen before.
Well, now the cycle is happening again and the next housing market crash and economic collapse is imminent. Home prices surged to unprecedented heights in 2017, and this was especially true in the hottest markets on the east and west coasts. But now interest rates are going up and home sales are starting to slow down substantially. We certainly aren’t too far away from the next housing crash and another horrible foreclosure crisis, and many experts are beginning to sound the alarm of economic collapse.
What is a ‘Housing Crash’ Despite housing being a secure asset, the housing market can be prone to bubbles and periods of rapidly falling prices. In recent years, the period 2005-09 saw a prolonged and significant fall in house prices in both the US and Europe. A housing market crash can be precipitated by a change in economic fundamentals (higher interest rates, lower growth) and/or a change in market sentiment (confidence turning to pessimism. What causes housing market crashes? Essentially a period of falling house prices occurs when there is a fall in demand for buying houses/more people putting houses on the market.
The main reasons for this include: A rise in interest rates. Mortgage payments can take 20-50% of a homeowners disposable income. A small rise in rates can increase the cost of mortgage payments and make buying a house less affordable. If homeowners take out fixed rate mortgages, they can be insulated from interest rate rises for 2-10 years (depending on the term). In the UK about 50% of mortgages are variable rate mortgages, so homeowners will feel the effects of higher. Definition Of Economic Collapse: An economic collapse is essentially a severe version of an economic depression, where an economy is in complete distress for years, or possibly even decades.
Economic collapse is characterized by economic depression, civil unrest and highly increased poverty levels. The 1929 stock market crash and Great Depression is a main example of an economic collapse. The 1929 stock market crash brought on a collapse that lasted for many years and saw high levels of poverty. Well-known economist John Maynard Keynes claimed this was from the total lack of government involvement in the economy or the financial markets.
Definition Of Stock Market Crash: A stock market crash is a sharp dramatic decline of stock prices across a significant cross-section of a stock market, resulting in a significant loss of paper wealth. Stock market Crashes are driven by panic as much as by underlying economic factors. They often follow speculative stock market bubbles that are happening now all around the world.