U.S Housing Bubble 112SIS47 Ji Hee Kim 112SIS64 Li Ji Cho

INTRODUCTION Financial engineering build dreams and those dreams turn to be night mare, other people pay for it

Affecting many parts of the United States Housing Market. INTRODUCTION Definition of housing bubble Peaked 2006 Decline 2006-2007 Largest price drop Most significant risk Affecting many parts of the United States Housing Market.

Why the housing bubble cause ? The structure of Lone system in1980 이 구조로 더 이상 돈을 빌려 주는 사람이 책임을 지지 않게 되었다.

Why the housing bubble cause ? Traditional Mortgage New creation Mortgage

Why the housing bubble cause ?

Why the housing bubble cause ? Other Important Factor Largest Insurance Company Sell credit fault swap Any body insure my house

Main Cause for Housing bubble Subprime: profitable but safe?????? Why the housing bubble cause ? Deregulation+Greedy = Disaster Main Cause for Housing bubble High Rating Risk Security Deregulation Real profit + Bonus AAA Subprime: profitable but safe?????? 안전하지 않음에도 불구하고 AAA 등급을 주었고 그것에 대한 규제가 전혀 없었으며 regulations was 관련 사람들은 이러한 상품으로 엄청난 보너스를 받고 부자가 되었다. $$$ flowing through securitization chain - Anyone can get a mortgage

Why the housing bubble cause ? Deregulation+Greedy = Disaster skyrocketing! Bubble! 1.그것은 real profit 이 아니 였고 just money 였는데 씨스템에 의해 창조된 money 2. 사람들은 스왑 상품이 안전하다 여겼고 3. 그래서 집값의99.93 %를 대출해서 집을 샀다. 그결과, 하우징 버블이 일어났다.

Loan for 99% of house price Why the housing bubble cause ? Deregulation+Greedy = Disaster Real profit??? – No!! Loan for 99% of house price 1.그것은 real profit 이 아니 였고 just money 였는데 씨스템에 의해 창조된 money 2. 사람들은 스왑 상품이 안전하다 여겼고 3. 그래서 집값의99.93 %를 대출해서 집을 샀다. 그결과, 하우징 버블이 일어났다. Bust!!!!!

High Unemployment Rate (10%) Side effect on China manufacture Housing Bubble & Bust As a result.. Collapse of Market. AIG- 130 billions of dept - Cost taxes ! High Unemployment Rate (10%) Side effect on China manufacture 저 스왑으로 인해서

Conclusion 2012 Housing Market Warren Buffet: It’s time to buy a house! (single family homes) 1. absence of many of these big institutional investors 2. rent-to-earnings ratio has fallen to 2004 levels "Housing will come back - you can be sure of that," said Buffett. It’s time to buy a house! (single family homes) Reason1: the absence of many of these big institutional investors in the U.S. residential real estate market, it is less competitive than the stock market (When institutional investors of size do enter the residential real estate market, they usually go for apartment buildings, which leaves the single-family homes segment even less competitive than the general residential real estate market.) Reason 2: the rent-to-earnings ratio has fallen to 2004 levels Reason 3: Mortgage rate is historic low mortgage interest rates remain under 4 percent for a 30-year fixed-rate mortgage. If you're willing to look at a 15-year mortgage, you can find one for about 3 to 3.25 percent. Some lenders are now offering 10-year loans at 3 percent or less. These interest rates are bouncing around at a historic low level, saving homeowners who can refinance hundreds or thousands of dollars per year. 3. Mortgage rate is historic low

Conclusion 2012 Housing Market Housing Starts vs Housing Formation H.F dramatic decrease speculative frenzy that saw people buying properties (as either primary residences or investments) 저 스왑으로 인해서 considerably less than H.F

Household debt is still Household debt (112% of disposable income) Conclusion 2012 Housing Market significant inventory of homes still under debt Pending inventory (1.6 million) Household debt is still Household debt (112% of disposable income) there are a lot of potential homes available for sale, or likely to be sold, that aren’t yet officially listed. As The Wall Street Journal’s Real Time Economics blog pointed out last week, mortgage information tracker CoreLogic estimated that there was a pending inventory of 1.6 million units in January that were seriously delinquent, in foreclosure or already owned by lenders. That puts January’s shadow inventory at the same level as in January 2009 US consumers are still struggling under debt from the last housing boom and are only about half way through their deleveraging. Household debt is still 112% of disposable income, higher than the long-term average of around 80%.

Conclusion THANK YOU Q & A 저 스왑으로 인해서