Housing Crisis Essay
From late 2001 through early 2004, the housing market was busting record rates in sales and the fast growth made housing prices soar to record highs. For example, the value of a home bought in late 2001, for a price of $290K, could well have the retail value of $340K by the middle of 2002, and by the following year could near double in value to an astonishing $460K or more. These out of the norm home values were driving people to suddenly sell their homes they had owned for years at double the original value, and make a nice profit to …show more content…
Investment groups would not have invested in some of these bundled packages, but the credit rating companies, such as Moody’s, Standard & Poor’s (S&P) was putting a rating risk of “AAA” or “A+” on these mixed bundled securities that were being invested in or “sold” to companies through Wall Street. A rating of “AAA” or “A+” is a stamp of approval. Investors needed no more to jump into the game.
In late 2004 the housing market was saturated with homes and the interest rate the Fed Reserve had been keeping so low, was one the rise. This didn’t slow down the boom quiet yet though. The banks started to get more creative with the types of loans they were financing. For example: an investor who is buying two or three homes