| Unless you are a caveman in an area where no | | | | A home that is foreclosed affects the value of |
| other human being can affect your welfare, you | | | | the properties surrounding it. For example, during |
| are most certainly going to be affected by the | | | | a loan process, the equity (or difference between |
| activities of the economy. An economy, as | | | | the value of the property and the amount owed) |
| defined and abbreviated by Wikipedia, is the | | | | is first determined by a report generated by a |
| realized social system of production, exchange, | | | | certified appraiser. The appraiser will physically go |
| distribution, and consumption of goods and | | | | into the subject property, make an analysis based |
| services of a country or other area. Therefore, | | | | on the property conditions and its surrounding |
| an economy involves everything you own, | | | | areas, and determine its appraised value by |
| including the lifestyle you have, and the activities | | | | comparing it to properties that have recently |
| that take place in your life. Today, one of the | | | | closed escrow or have been foreclosed on. |
| biggest challenges the U.S. economy is having has | | | | |
| to do with the crisis that is currently going on with | | | | Property values play a significant factor in the |
| the housing market. Below is a brief description | | | | status of the housing market and the |
| of the effects of the housing market on the U.S. | | | | economy. During the housing boom that began in |
| economy. | | | | the early part of the 21st Century, the U.S. |
| To an individual who owns a house, the purchase | | | | economy soared. As equities increased, so did |
| of that house may be one of the biggest | | | | consumer spending. As a result, more businesses |
| investments they have or will ever make. | | | | opened up and more jobs became available. The |
| Therefore, the response it has to the market | | | | stock markets also soared with interest rates at |
| and vice versa can take a large toll on that | | | | record lows. |
| individual's life depending on their involvement with | | | | |
| that investment. Unless a homeowner is paying | | | | Many people knew the housing market bubble |
| cash in full for a property, a home purchase is | | | | was bound to pop at any time. After all, what |
| generally done with a mortgage attached to | | | | goes up must eventually come down, right? |
| it. This is a legal instrument that states the terms | | | | Subprime lending loosened their guidelines to |
| needed to be met by the borrower so that the | | | | increase nationwide homeownership. People who |
| borrower can move into their desired | | | | were unable to pay for their mortgages were |
| property. It is a promise between the bank and | | | | given loose options to open up new accounts so |
| the borrower, stating that the property will belong | | | | they can be encouraged to purchase homes they |
| to the borrower until the loan or mortgage is paid | | | | couldn't afford. After values increased and equity |
| off. If the borrower defaults on payments for | | | | lines were stripped, foreclosures and mortgage |
| the property, the mortgage holder or bank then | | | | defaults took their place. Eventually, supply |
| has the right to foreclose on the property and | | | | increased and demand decreased causing a |
| evict the homeowners. | | | | tremendous toll on the U.S. economy. |
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