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DISCUSSION TOPIC SESSION 2: HOUSING BUBBLE AND CRASH
The housing bubble in the United States and in other parts of the world dramatically affected the lives of people around the world. In the United States many are still experiencing the effects of the housing bubble.
In this discussion we will begin our study of how the housing bubble fits into the larger picture of the financial crisis and the Great Recession. Students may choose between two topics below.
You need not write a long essay. 150-300 words will suffice. But you MUST address AT LEAST ONE of the topics below
1) Address ONE of the TWO topics below.
Students must address at least ONE the following TWO TOPICS:
TOPIC ONE: Briefly describe one of the following kinds of mortgage and 1) identify who might benefit from this kind of mortgage and 2) explain why widespread use of this kind of mortgage might create risks for banks (do not repeat or reproduce information and commentary already presented in the thread; move on to TOPIC TWO if what you want to say about TOPIC ONE has already been adequately explained):
- Subprime mortgage
- 2/28 ARM (or other forms of subprime mortgages that reduce monthly payments e.g. “interest only loans”)
- Low doc or no doc loans
- NINJA loans
TOPIC TWO: In the class we will work on constructing a timeline for the financial crisis. Here we will focus on the Housing Crisis. Here students have the opportunity to identify and describe the events or signposts that they believe belong in the timeline. Here is how to do it:
- Identify an event or decision that you believe is crucial to understanding the historical progression of the housing crisis. (Let’s focus on the period roughly between 2005-2008, but if you feel some event or decision before this period is crucial, you may include it.) And here let’s keep focused on the housing crisis; we will move on to events, decisions and policies of the financial crisis in the coming weeks.
- Describe that event or decision.
- If you can, include a link to a video or article that explains the event or decision. (This is not required, but our final timeline will be much more engaging with this content: posting good links will further improve your ‘engagement’ grade.)
Here is a resource that may prove useful: http://en.wikipedia.org/wiki/Timeline_of_the_United_States_housing_bubble (Remember this is Wikipedia, a public encyclopedia where anyone can post. Verify information. There are many useful references in this timeline.)
HERE ARE MORE SUGGESTIONS ABOUT WHERE TO START:
When did housing prices peak? When did the prices start to fall?
When did housing starts begin to fall?
What were some of the main causes to this inflation of housing prices? Besides the signposts in the data can you identify any crucial events or decisions that were key reasons why housing prices behaved the way they did? If you feel you must go back before 2005, please do.
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