Question

Greedy investing in subprime mortgage securities caused the financial crisis of 2008. Explain why the first sentence is true (or explain why you disagree if you think it is not true). How did subprime mortgages in the U.S. become a worldwide financial issue? Did any of you suffer as a result of the financial crisis of 2008 ( or your parents, if that is a more age appropriate question).

I'll start: I tried to sell my house during the financial crisis. I received only one offer which was $200K below the tax assessed value of the property. Why were buyers incapable or unwilling to buy a good property during the crisis. (In 2012 the house sold in less than 6 weeks for the asking price.)

Answer 1

The buyers were unwilling to buy during the crises because of uncertainty in the housing market during the 2008 crises and the period after that.

The start of the sub-prime crises was a few years back before the actual crises when loans were given to undesirable people with no credit history. So, as the time passed and when it was due for payments, obviously these individuals who had no credit history defaulted. As they defaulted, their homes which were mortgaged were put on the market for sale. There were thousands of millions of such homes that came into the market. So, the supply was very high and there was no demand to meet the supply. As a result of which the prices of homes crashed due to the huge demand supply gap. Therefore you found it very difficult to sell your home. You were lucky that you got at least one offer. There were situations when there was no offer and people just gave up on their homes.

This is explanation that I would give.