1. US Bubbles and Bursts Housing Crisis and Subprime Mortgages 082SIS85 Ewha International Business Jaeyoung Alleich Shin

2. To Dip in Buying Houses

3. Martket Reactions Desperate to Sell ->Subprime Market mortgage lenders were desperate to maintain sales. Therefore they just found new ways to sell the more expensive houses. In particular mortgage lenders did several things to maintain sales amongst those with poor credit, low income and higher risk see example of inappropriate selling of mortgages William Pool, St. Louis Federal Reserve President, said today that the recent US housing boom was fueled by subprime developments in the securities markets. “This cycle was really quite different and the boom was driven by the growth of the subprime market and the securitization of those markets,”

4. Something Comes up Dead Zones Danger Zones Safe Heavens BostonChicagoCleverland Las VegasLAColumbus MiamiNYDallas DC, NVSanFranci sco Houston PhonixSeattleKansas City Secramen to OaklandOmaha San DiegoPittsburgh as interest rates have increased from 1% to 5% it has significantly increased the cost of mortgage payments for homeowners. A 2% rise in interest rates can increase the cost of mortgage interest payments by 40%

5. Ugly Truth vs. Market Liberty The boom years encouraged an excess of new houses being built. The supply of housing now exceeds the demand, therefore the price of housing is likely to continue to fall The Housing market was providing greater returns than the stock market, therefore this encourages ‘buy’ to investors. As house prices start to fall this section of the market changes completely.

6. Why the problem occured Many of these subprime mortgages, which were designed for borrowers with risky credit, started with a low interest rate, that was fixed for generally two years, adjusted into payments that borrowers could no longer afford. When this happens these borrowers are forced to sell their homes for lower than current market values. This produced a chain effect where eventually people were forced into foreclosure because they owed more than their house was worth.

7. Bubble Bursts out National home sales and prices both fell dramatically in March 2007 — the steepest plunge since the 1989 Savings and Loan crisis. According to NAR data, sales were down 13% to 482,000 from the peak of 554,000 in March 2006, and the national median price fell nearly 6% to $217,000 from a peak of $230,200 in July 2006

8. Black Hawk Down In March 2007, the United States' sub- prime mortgage industry collapsed due to higher-than- expected home foreclosure rates, with more than 25 sub- prime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale.

9. Current crisis Oil prices have almost doubled over the past year some economies have started to undergo the vicious cycle of inflation, shrinking consumption, falling production and less investment. Concerns are growing that countries around the world might suffer from stagflation, a combination of economic stagnation and higher inflation. Businesses and individuals have already begun to feel the pinch of growing inflationary pressure stemming from steep rises in the price of fuel, natural resources, grain and food.

10. Thank you