What effect will this subprime mortgage crisis in the U.S. have on national and international housing market?

      The issues of subprime loans and tightening lending criterions that not only have great effects (with harsh and strict rules) on new mortgages, lending or credit applications, refinances, and first time home buyers on the housing market, but also have major consequences on the values of existing home market, economy, employment, import and export markets, and social, political, or business developments. Gitman (2009) analyzes, subprime mortgages and loans “climbed from near 0 % in 1997 to about 20% of mortgage originations in 2006 (with some $300 billion worth of adjustable rate mortgage or ARM)… [And] the mortgage banker group reported in March 2007 that 13% of all subprime loans were in delinquency, more than 5 times the delinquency rate for home loans to borrowers with the best credit ratings” (p. 197).  What and where were the financial regulators, supervisory bodies, or government administrations or watchdogs doing during these years?  Where is the leadership or managerial finance? Do we need another new financial regulation or act?

      Hagerty (2009) analyzes and examines that according to Zillow.com (an online real estate data and research site) “more Americans are moving from denial to acceptance… [And] it found in a recent survey (taken by Harris Interactive between Jan. 6 and 8 and involved 2,271 adults, of whom 1,573 were homeowners, in which) 57% of participants believe their homes lost value during the past year. That was up from just 38% in a similar survey during last year’s second quarter (p.1).  As a matter of fact, the average prices of homes and buildings in all major cities (including London, Toronto, Shanghai, Hong Kong and Tokyo) are declining promptly. On the other hand, based on the market of supply and demand, good credit investors or home buyers with enough savings or cashes, nowadays, have more selections and bargaining power to buy their properties in this sluggish housing market condition.

References

Gitman, L. (2009). Principles of managerial finance (12th edition). Boston, MA: Prentice-Hall.

Hagerty, J. (2009, February, 13). Zillow report shows homeowners facing reality, sort of.  The Wall Street Journal online. Retrieved February 13, 2009, from http://blogs.wsj.com/developments/