Example Of Research Paper On Causes Of Housing Bubble Burst

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U.S. Housing Bubble Burst in 2008

Introduction

In December 2007, the world witnessed a great recession in the United States of America. According to the universal consensus, the credit crisis ensuing from the housing bubble burst was the major factor behind the origin of the said recession. Economists agree that there were a number of causes that led to the 2008 housing bubble burst in the United States of America. The combination of all the factors resulted in the complexity and extremity of the situation and made the consequential credit crisis more severe (Belsky 9).

How should the Causes of Housing Bubble have been Prevented?
It would be important to note that the most principal cause of this national dilemma was irrational exuberance. There would not have been any occurrence of housing bubble without the pervasive certainty that rise in prices of houses would continue. In the same connection, there would have been no decrease in mortgage interest rates if credit rating agencies and overseas investors had not trusted that the home prices in the United States would keep increasing. Irrational exuberance also exacerbated the situation by increasing leverages and encouraging low short-term interest rates (Holt 128). Furthermore, the governmental lack of regulation also played a significant part in the overall scenario. The authorities failed to notice the subprime mortgage market explosion that increased over 10% within two years. It was a time when the employment rates were weak and wages were stagnant. Therefore, such a great leap should have concerned the authorities efficiently (Baker 80).

Works Cited

Baker, D. "The Housing Bubble and the Financial Crisis." Real-World Economics Review (2008): 73-81. Print.
Belsky, Janet. Experiencing the Lifespan. 2nd ed. New York: Worth, 2010. Print.
Holt, J. "A Summary of the Primary Causes of the Housing Bubble and the Resulting Credit Crisis: A Non-Technical Paper." The Journal of Business Inquiry 08.01 (2009): 120-29. Print.
Merriam, D. "Cause of the Housing Bubble, Burst and Recession Revealed: It's Growth Management." Planetizen: The Urban Planning, Design, and Development Network. Urban Insight, Inc., 30 Nov. 2009. Web. 13 Feb. 2015. <http://www.planetizen.com/node/41867>.
Palley, Thomas I. From Financial Crisis to Stagnation: The Destruction of Shared Prosperity and the Role of Economics. New York: Cambridge UP, 2012. Print.