Sub prime impact?

Question

Explanations and elaboration

Answer 1

I am in the building trade. What I see is that we have denied so many people loans that houses are not moving. Only the rich buy homes now.

Answer 2

Due to the fact that the fed reserve, as opposed to a free economy, control the interest rate it did not increase to keep pace with the growing demand for loans. So we ended up with way to many loans, and people who really shouldn't have been given loans, getting loans. Then eventually real estate prices fell and people foreclosed and couldn't pay loans back. Increased foreclosures lead to lower real estate prices, and this in turn lead to more foreclosures and defaulted loans. Unless mass credit card defaulting becomes a problem things should level out eventually.

Answer 3

Devastating is the word. This situation has reduced credit availability and the spending capacity of American consumers by dramatically lowering the value of their properties, consequently flooding the property market with properties nobody can afford to buy. In a nutshell, disposable income has been reduced and does not look like changing until consumer confidence improves and wealth begins to be accumulated in another upward cycle.