Housing Boom

Introduction

The housing crisis has worsened over the period in the U.S. financial crisis weighing heavily on the sector. Home re-sales fell 8% in comparison to the previous times, to a much greater rate of 5.04 million unit's annual rate.

The U.S. housing crisis is far from over and the worst is probably still to come. The year 2008 was to be marked by a further increase in defaults from borrower's side and massive increases in their debt repayments was seen. Of the 2.5 million Americans who have made modest loans whose rates are to be automatically identified, 1.5 million were in a state of financial distress era (Bair 209).

Discussion

The volume of investment started growing gigantic. And the growth rate of investment in real estate had slowed in the particular year. For analysts, the drop in sales was due in part to the rapid increase in prices. Prices for real estate had been already overvalued according to its actual stated price.

The euro zone went slow. The global boom in housing prices continued into 2007, drastic slowdown had occurred in several European countries. An overheating market and elevated interest rates were the focal grounds of the slowdown. Rise in nine times to 4% in June 2007 from its low of 2% in November 2006 had occurred in the key interest rate of the European Central Bank (ECB).

A deceleration of 12.07% was observed. Besides the higher interest rate that was adapted overwhelmingly, the difficulty of stamp duty on heating also contributed to the turn down. U.S. Federal funds rate were noticed to a rise considerably from a low to a high level. This rate increase has led to crisis for sub major borrowers, leading to delays in foreclosures and expenditure. Captivatingly, European countries who had not taken on the euro had qualified ...