Iconomy features7/31/2023 ![]() In fact, it was even worse for the poor because they used so much debt to purchase their homes. So the poor were much more vulnerable to a crash in housing prices in 2007 than the rich were. On the other hand, housing was a much smaller part of the overall asset portfolios of the richest households - less than 20 percent. Another way of saying this is that the poor held very few financial assets such as stocks, bonds or mutual funds. For the poorest homeowners, houses were by far the most important thing they owned going into the Great Recession, making up almost 80 percent of their total assets. homeowners into net-worth quintiles, and plots housing as a fraction of all assets for each quintile in 2007. The tech crash concentrated losses on the rich, but the rich had almost no debt and didn’t need to cut back their spending. What about the tech crash? In 2001, stocks were held almost exclusively by the rich. The sharp decline in home prices starting in 2007 concentrated losses on people with the least capacity to bear them, disproportionately affecting poor homeowners who then stopped spending. What explains these different outcomes? In our forthcoming book, “House of Debt,” we argue that it was the distribution of losses that made the housing crash so much more severe than the dot-com crash. 2 The bursting of the tech bubble, on the other hand, had almost no effect at all retail spending from 2000 to 2002 actually increased by 5 percent. The housing crash killed retail spending, which collapsed 8 percent from 2007 to 2009, one of the largest two-year drops in recorded American history. Part of this difference can be seen in consumer spending. 1ĭespite seeing similar nominal dollar losses, the housing crash led to the Great Recession, while the dot-com crash led to a mild recession. households fell by nearly the same amount - $6 trillion. ![]() In 2000, the dot-com bubble burst, destroying $6.2 trillion in household wealth over the next two years.įive years later, the housing market crashed, and from 2007 to 2009, the value of real estate owned by U.S. ![]()
0 Comments
Leave a Reply.AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |