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Implications and Solutions

In: Anatomy of a Financial Crisis

Author

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  • Marc Jarsulic

Abstract

Previous chapters have sketched the trajectory of the ongoing financial crisis. It had its origin in the market for houses. Beginning in 1998, the real price of houses began to rise at an accelerating and historically unprecedented rate. This price trend turned into an asset bubble—houses were bought at prices that made sense only if house prices continued to rise. When the price increases did cease in 2006—because inventories of vacant and unsold houses grew too large—the weakest homeowners were immediately affected. Nonprime borrowers, who were dependent on increased equity to allow them to refinance or at least pay off the value of their loans, were the first to suffer. By 2007 nonprime borrowers were defaulting and going into foreclosure at an accelerating rate.

Suggested Citation

  • Marc Jarsulic, 2010. "Implications and Solutions," Palgrave Macmillan Books, in: Anatomy of a Financial Crisis, chapter 0, pages 125-156, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-10618-5_5
    DOI: 10.1057/9780230106185_5
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    Cited by:

    1. Gerardo Estrada Sánchez & Federico Hernández Álvarez & Andrés Giovanni Camacho Ardila, 2023. "Detección de periodos de crisis del NASDAQ con EEMD -AE," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 18(1), pages 1-26, Enero - M.

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