Navigating the Turbulent Economic Waters of the 2007 Great Recession and the Crash of the Housing Market

What triggered the crash of the U.S. housing market? This analysis looks at the economic and industry forces that led to an economic downturn that put as many as half of all U.S. residential builders out of business.

Since the Great Depression, the U.S. housing market has significantly influenced economic production and employment levels. Direct and indirect investments in the housing industry, along with the induced economic activities such as real estate transactions and construction as well as other factors, accounted for an estimated 15-20% of GDP during boom years (CBPP, 2012).
The burst of the $8 trillion housing bubble in 2007 and the subsequent collapse of the financial markets in 2008 created massive disarray in homebuilding (Bivens, 2011). As many as 50% of homebuilders closed their doors, either voluntarily or through bankruptcy filings (Quint, 2015). Concurrently, from 2006 through 2012, the Great Recession resulted in the loss of over $7 trillion of home equity (Gould Ellen, 2012). Over 24 percent of home mortgages went “underwater” with balances exceeding home values (Carter & Gottschalck, n.d.). For some homeowners, the unfortunate thought of losing their homes through foreclosure and incurring disruption to family life became a reality. The stress from threats of the loss of a home, unemployment, and depletion of savings exacted a great toll on many. Not since the Great Depression has the U.S. economy faced forces so devastating to the housing market and personal wealth.

Authors: Ali Hasbini, Ronald K. Satterfield


Cite as: Hasbini, M.A. and Satterfield, R.K. (2018). Navigating the turbulent economic waters of the 2007 Great Recession and the crash of the housing market. Muma Business Review, 2(1). 1-19.