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The Housing Bubble

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"
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