Why was there no government response?
Kyle Nguyen
Michelle Pham
Zachary Pruitt
- The Efficient Market Theory
- Did not want to start trouble
How did it affect the economy?
Efficient Market Theory
- Job loss
- reduced consumer spending
- increased personal savings
"The efficient markets theory is a proposition that the prices of stocks, bonds, and other securities fully reflect all available information at any point in time."
What could be done now?
- Raising Margin Requirements
- More restrictions on lending agreements
How did it affect the housing market?
What is it?
- Decreases in Property Values
- Rises in Mortgage Interest Rates
- Foreclosing
- Decrease in Bank Loans
A housing bubble occurs when there is a high demand for real estate; the prices increase because of demand not necessarily based on need but based on want created by speculators buying and selling short term for profit.
How did it start?
- Began in 1997 at the uptrend of rising house prices
- Became a bubble when the housing demand was created by speculators buying and selling short term for profit
- Fueled by increase demand from low interest rates and loose credit
- Introduction of "affordability loans"
- 2005, out priced home buyers, rising interest rates, and retreating speculators causes a drop in home values making the bubble "POP"