The Global Financial Crisis of 2008-09 was a period of severe macroeconomic instability for the United States and the global economy more generally. The crisis was precipitated by the collapse of a number of financial institutions who were deeply involved in the U.S. mortgage market and associated credit markets. Beginning in the Summer of 2007, a number of banks began to report issues with increasing mortgage delinquencies and the problem of not being able to accurately price derivatives contracts which were based on bundles of these U.S. residential mortgages. By the end of 2008, U.S. financial institutions had begun to fail due to their exposure to the housing market, leading to one of the deepest recessions in the history of the United States and to extensive government bailouts of the financial sector.

Subprime and the collapse of the U.S. mortgage market

The early 2000s had seen explosive growth in the U.S. mortgage market, as credit became cheaper due to the Federal Reserve's decision to lower interest rates in the aftermath of the 2001 'Dot Com' Crash, as well as because of the increasing globalization of financial flows which directed funds into U.S. financial markets. Lower mortgage rates gave incentive to financial institutions to begin lending to riskier borrowers, using so-called 'subprime' loans. These were loans to borrowers with poor credit scores, who would not have met the requirements for a conventional mortgage loan. In order to hedge against the risk of these riskier loans, financial institutions began to use complex financial instruments known as derivatives, which bundled mortgage loans together and allowed the risk of default to be sold on to willing investors. This practice was supposed to remove the risk from these loans, by effectively allowing credit institutions to buy insurance against delinquencies. Due to the fraudulent practices of credit ratings agencies, however, the price of these contacts did not reflect the real risk of the loans involved. As the reality of the inability of the borrowers to repay began to kick in during 2007, the financial markets which traded these derivatives came under increasing stress and eventually led to a 'sudden stop' in trading and credit intermediation during 2008.

Market Panic and The Great Recession

As borrowers failed to make repayments, this had a knock-on effect among financial institutions who were highly leveraged with financial instruments based on the mortgage market. Lehman Brothers, one of the world's largest investment banks, failed on September 15th 2008, causing widespread panic in financial markets. Due to the fear of an unprecedented collapse in the financial sector which would have untold consequences for the wider economy, the U.S. government and central bank, The Fed, intervened the following day to bailout the United States' largest insurance company, AIG, and to backstop financial markets. The crisis prompted a deep recession, known colloquially as The Great Recession, drawing parallels between this period and The Great Depression. The collapse of credit intermediation in the economy lead to further issues in the real economy, as business were increasingly unable to pay back loans and were forced to lay off staff, driving unemployment to a high of almost 10 percent in 2010. While there has been criticism of the U.S. government's actions to bailout the financial institutions involved, the actions of the government and the Fed are seen by many as having prevented the crisis from spiraling into a depression of the magnitude of The Great Depression.

Mortgages Category Archives — Massachusetts Real Estate Lawyer Blog Published by Massachusetts Real Estate Attorneys — Pulgini & Norton, LLP Attorneys at Law | Published by Massachusetts Real Estate Attorneys — Pulgini & Norton, LLP Attorneys at Law

HOLC, in consultation with local real estate professionals and local policymakers, categorized neighborhoods in hundreds of cities in the United States into four types: Best (A), Still Desirable (B), Definitely Declining (C), and Hazardous (D). So-called “hazardous” zones were colored red on these maps. These zones were then used to approve or deny credit-lending and mortgage-backing by banks and the Federal Housing Administration. The descriptions provided by HOLC in their reports rely heavily on race and ethnicity as critical elements in assigning these grades. According to the University of Richmond's Mapping Inequality project, “Arguably the HOLC agents in the other two hundred-plus cities graded through this program adopted a consistently white, elite standpoint or perspective. HOLC assumed and insisted that the residency of African-Americans and immigrants, as well as working-class whites, compromised the values of homes and the security of mortgages” (Mapping Inequality). HOLC’s classifications were one contributory factor in underinvestment in a neighborhood, and generally, although not always, closed off many, especially people of color, from the credit necessary to purchase their own homes.The 15 Worcester neighborhood zones included on the map are ordered from Zone 1 (categorized as "Best") to Zone 15, with the highest numbered zones included in the least desirable "Hazardous" category. The exact descriptions used by HOLC to classify the neighborhoods in 1936 are included, and therefore may contain some disturbing language. Many scholars and institutions have focused their efforts on tracking the effects the 1930s redlining maps still have today. The Mapping Inequality project by the University of Richmond has collected and analyzed a comprehensive set of redlining maps for more than 200 cities in the U.S. One of their conclusions is that, for most cities, there are striking and persistent geographic similarities between redlined zones and currently vulnerable areas even after eighty years. See the Mapping Inequality website for more information (https://dsl.richmond.edu/panorama/redlining).This digitized version prepared by the Worcester Regional Research Bureau was based on a scanned copy from the National Archives, obtained thanks to Dr. Robert Nelson, the Digital Scholarship Lab, and the rest of his team at Mapping Inequality at the University of Richmond. Dr. Nelson worked with The Research Bureau directly to track it down in the Archives.Informing Worcester is the City of Worcester's open data portal where interested parties can obtain public information at no cost.

House prices grew year-on-year in most states in the U.S. in the third quarter of 2024. The District of Columbia was the only exception, with a decline of ***** percent. The annual appreciation for single-family housing in the U.S. was **** percent, while in Hawaii—the state where homes appreciated the most—the increase exceeded ** percent. How have home prices developed in recent years? House price growth in the U.S. has been going strong for years. In 2024, the median sales price of a single-family home exceeded ******* U.S. dollars, up from ******* U.S. dollars five years ago. One of the factors driving house prices was the cost of credit. The record-low federal funds effective rate allowed mortgage lenders to set mortgage interest rates as low as *** percent. With interest rates on the rise, home buying has also slowed, causing fluctuations in house prices. Why are house prices growing? Many markets in the U.S. are overheated because supply has not been able to keep up with demand. How many homes enter the housing market depends on the construction output, whereas the availability of existing homes for purchase depends on many other factors, such as the willingness of owners to sell. Furthermore, growing investor appetite in the housing sector means that prospective homebuyers have some extra competition to worry about. In certain metros, for example, the share of homes bought by investors exceeded ** percent in 2024.

The U.S. housing market has slowed, after ** consecutive years of rising home prices. In 2021, house prices surged by an unprecedented ** percent, marking the highest increase on record. However, the market has since cooled, with the Freddie Mac House Price Index showing more modest growth between 2022 and 2024. In 2024, home prices increased by *** percent. That was lower than the long-term average of *** percent since 1990. Impact of mortgage rates on homebuying The recent cooling in the housing market can be partly attributed to rising mortgage rates. After reaching a record low of **** percent in 2021, the average annual rate on a 30-year fixed-rate mortgage more than doubled in 2023. This significant increase has made homeownership less affordable for many potential buyers, contributing to a substantial decline in home sales. Despite these challenges, forecasts suggest a potential recovery in the coming years. How much does it cost to buy a house in the U.S.? In 2023, the median sales price of an existing single-family home reached a record high of over ******* U.S. dollars. Newly built homes were even pricier, despite a slight decline in the median sales price in 2023. Naturally, home prices continue to vary significantly across the country, with West Virginia being the most affordable state for homebuyers.