The Park Place Economist


The British sometimes use the phrase “safe as houses” to describe a sure bet or an investment that carries little to no risk. Until a few years ago, this expression held true in America as well, where housing prices had done nothing but steadily rise since the Great Depression, and the general public considered a home to be one of the best investments possible. As the nation headed into a new Millennium, mortgage loans were easy to come by and housing prices soared while the economy appeared to thrive. The government strongly encouraged Americans to own their own home, and with banks devising creative methods to make money off mortgage loans, everyone appeared to win. However, the seemingly stable economy was belied by the underlying fundamentals, leading to a global financial shakeup that has changed the way we perceive the economy. This paper will trace the housing crisis to its roots and examine how it impacted the broader American economy, bringing us to our current financial situation of a depressed housing market and lingering unemployment.