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The subprime crisis was caused by a boom in the housing market in the 2000s that lowered credit quality and led to risky adjustable rate mortgages, as well as attractive returns from mortgage-backed securities and cuts to interest rates, fueling rising household debt. This caused housing prices to decline in 2006 and led to massive impacts like 9 million job losses, a 40% drop in GDP from 2007, an $8 trillion stock market loss, and the Lehman Brothers bankruptcy in September 2008.
The subprime crisis was caused by a boom in the housing market in the 2000s that lowered credit quality and led to risky adjustable rate mortgages, as well as attractive returns from mortgage-backed securities and cuts to interest rates, fueling rising household debt. This caused housing prices to decline in 2006 and led to massive impacts like 9 million job losses, a 40% drop in GDP from 2007, an $8 trillion stock market loss, and the Lehman Brothers bankruptcy in September 2008.
The subprime crisis was caused by a boom in the housing market in the 2000s that lowered credit quality and led to risky adjustable rate mortgages, as well as attractive returns from mortgage-backed securities and cuts to interest rates, fueling rising household debt. This caused housing prices to decline in 2006 and led to massive impacts like 9 million job losses, a 40% drop in GDP from 2007, an $8 trillion stock market loss, and the Lehman Brothers bankruptcy in September 2008.
Lowered credit Quality (rise from 8% to 20%) Adjustable rate mortgages(80%). Attractive rate of returns offered by MBS and CDOs. Fed short term interest rate cuts(6.5% to 1%) Debt to disposable personal income (rise from 77% to 127%) Decline of housing prices in mid 2006.
Impact of subprime crisis
9 million job lost in 2008-2009 40% of 2007 GDP was lost Between Jan to Oct 2008 US stock market suffered a loss of $8 trillion Lehman Brother filed for bankruptcy protection on Sept 15,2008.