HOUSING CRISIS

HOUSING CRISIS

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The housing boom affected many Americans in the year 2007-2008. The banks wanted to make abnormal profits and made the mortgage option available to many citizens even those who would normally not be allowed to get loans. The people at the time wanted to have a piece of the American dream meaning that they wanted to own homes in one way or another. They were so determined to own homes that they took the loans with high interest rates. They were also afraid that the interest rates would continue rising and they would not afford to own the homes in future. Most people took the loans in fear of the rising prices and interest rates. The banks continued making abnormal profits from this trend and the people who were not able to repay their loans had to give up their homes. The rate of inflation went higher and the cost of living soared. It was quite hard to keep up with the payments as many people suffered greatly due to the economic depression (Talbott, 2006).

As a citizen, life became harder during the depression. I wanted to own a home so that I would not keep paying rent and so that I could have a place of my own where someone would not kick me out whenever they wanted. However, this was an uphill task to achieve because the banks were giving loans but at a very high interest rate. The high interest rate would make it very hard for me to keep up with the monthly installments. Since the economy seemed to worsen with every passing month, I decided to take on the mortgage even with the high interest rates because it seemed as if they would never go down and they were always rising with every passing month. I figured that I would not be able to afford the home in the future and therefore it would be wiser to just take it immediately at the time. Paying the house turned out to be the most stressful time of my life because repaying the mortgage took more than half of my monthly salary (Talbott, 2006).

The housing crash caused a recession in the country. The recession was marked by people losing their jobs and others getting demoted. Another group of people had to contend with pay cuts because their companies could no longer afford to pay them the way that they did before. It was a very trying time. The elderly people could no longer afford to cater for their needs because of the rising inflation and the cost of living. It was hard to keep up with the same standards of living as before. However, the rich people were able to get richer while the poor people became poorer. This is because the policies that had been put in place favored the rich people and put the poor people at a disadvantage. Because of the decline in the economy, I had to accept a pay cut as the company that I was working for could not afford to continue paying me the salary that we had agreed on. I did not have a choice as the alternative was losing my job altogether. There was no job security either and I could be fired at any time. I could not afford to lose the job as getting another one would be next to impossible and I had bills to pay (Patterson, 2006, p.30).

The rate of inflation caused the prices of goods and services to go higher than expected. The higher costs of living meant that I would have to cut down on the expenses so that I could afford the necessities. I could no longer afford luxuries and even the kids had to transfer from a private school to a public school because I could no longer keep up with the payments. The sudden shift in status affected the children psychologically as they had to make do without the luxuries that they were used to. I also had to sell my car and get a cheaper one that would be easy to maintain and work with. I had to make major adjustments in the standard of life that I was accustomed to. The pressure was too much and it was tough trying to run a home on a meager income (Patterson, 2006, p. 32).

The cost of lending had also risen to very high rates and I could not borrow money to finance my education. I had already planned to continue with my higher education in 2007. The company had promised to pay part of the tuition fee but with the recession, they would not be able to do so. If I really wanted to continue with my education, I would have to find a way to finance it on my own. The only way that I could finance it at that time, was through a loan. However, I could not take out a loan at the time because I was still paying the huge mortgage amounts and the interest rates offered by the banks were too high (Patterson, 2006 p. 40).

References

Patterson, Laura A., & Koller, Cynthia A. Koller (2011). “Diffusion of Fraud Through Subprime Lending: The Perfect Storm.” In Mathieu Deflem (ed.) Economic Crisis and Crime (Sociology of Crime Law and Deviance, Volume 16), Emerald Group Publishing Limited, pp. 25–45.

Talbott R. John (2006). Sell Now!: The End of the Housing Bubble, New York: St. Martin’s Griffin.

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