The Crisis of the U.S. Housing Market: A study on subprime mortgages and the related legislation

Abstract

“The Crisis of the Housing Market” is a project about the rise of the crash of the U.S. housing market in 2007. The project aims to investigate and interpret the elements leading up to the crash, by outlining, discussing and analyzing certain factors behind the crash. These factors are primarily government policies, in the form of legislation, the usage and development of subprime mortgages, including the concept of derivatives and the process of securitization and finally we will use statistical data the back up our claims. The method of the project research is an empirical combination of qualitative and quantitative methods and is written within the academic disciplines of Political Science and Economics. Our theory consists of two giants within economics: Hyman Minsky and Milton Friedman - representing two ideologically opposing views on government regulation of the free market. In addition to that, we are also including the Efficient Market Hypothesis created by Eugene Fama. The empirical data will consist of both political policies regarding the regulation of the housing market, and statistics concerning various topics such as the quantity of subprime mortgages, homeownership and real estate prices.