The Housing Market Speculation as forex indicator

Reckless lending practices and rising house prices gave birth to the housing market speculation. In 2006, sub-prime mortgage crises arrived in the market due to the tentative borrowing in the housing market.

Housing market speculation

In the time period 2005-2006, around 40% of the homes bought were used for the investment purpose rather than for living. From 2000-2006, the price of houses kept on mounting until it reached almost doubled. This has never happened in the previous years when the increase of price was just limited to the inflation rate. During this time, investors took the rise of prices seriously and went on to purchase houses at low prices and then selling them at higher prices after some modifications. Many investors could put them in a high leverage position by buying multiple properties.
In this situation, the debt level was increased after speculating that such boom in the price of properties will go on. At that time, lenders went on lending the money to even high-risk borrowers. All this led to a giant tentative bubble in the financial market.
Banks and other lenders helped the investors in buying more and more property. The qualification for buying home for an investor was becoming weak as the only requirement at that was a bank account with money in it. The variety of loans started to become more volatile as borrowers were just needed to pay a small principal based on his salary to get a handsome amount of loan.
A huge pool of permanent income money, around $70 trillion which was saved for upper yields than conventional treasury yields was fixed by investment financial institutions to self created credit backed security and collateralized balance obligation inventions which in a twist were fixed to the mortgage market. This contributes chain ended huge amounts of wealth for both advance lenders and venture bankers.
Until 2006, the income of millions of mortgage owners was staying at a freezing point, and they were not going beyond that. At that point, there was a huge peak in the price of houses as it went on almost five times the annual salary of people. As a result, the immediate situation was that people refused to pay the mortgage and finally, the housing bubble went on to burst, and it left huge negative impact on the investment banks and mortgage lenders.
How was the customary mortgage sculpt displaced by a awful lending?
The real mortgage model that was useful for many years was that the real lenders will make it possible to hold the credit risk for the whole life span of the credit. However, at that time banks did a blunder by spreading the credit risk towards investors through security backed mortgage. In this way, banks were not managed to hold the loan until its maturity date. However, they still managed to sell it further and it created a bad circle which went at a pause after the bubble had busted.