Mortgage crisis may cause recession
- posted: 04 Dec. 2007
- scrollnews@byui.edu
Home prices across the nation skydived to all-time lows in October amidst a mortgage crisis that has renewed fears of a recession, according to a report by CNN.
Despite housing woes across the rest of the nation, Idaho has seen considerable growth over the years, according to the Idaho Statesman.
“Housing prices are really encouraging,” said Michael McCullough, a Madison County public school teacher and BYU-Idaho graduate. “My wife and I have been looking around Rigby and were really surprised at how affordable housing is. We originally looked around Rexburg, but it seems like you can get a better deal in the area surrounding it.”
Across the nation, new homes sold in October plunged 13 percent from the previous year, according the U.S. Census Bureau. A record 191,000 unsold new homes were built and on the market in October, according to CNN.
Weak sales in new homes have fueled economists’ worries that 2008 will see a recession instead of growth. For the past four years, the United States has seen considerable economic gains, according to The Wall Street Journal.
The continued aftermath of subprime lending, however, continues to negatively affect businesses and individuals. Subprime lending refers to the practice of lending money to borrowers who would normally not qualify for loans because of factors like poor credit or insufficient income, according to The New York Times.
Lenders provide the money needed to buy a home with interest rates that could change over time. The result was that when interest rates changed and became unaffordable, many were forced to foreclose their homes.
However, homeowners weren’t the only ones who lost. Citigroup, an investment bank, lost 11 trillion dollars as a result of the subprime mortgage crisis, according to The Wall Street Journal.
Regarding economic growth, White House officials are forecasting that the unemployment rate will move up 4.9 percent and consumer prices will increase 2.1 percent, according to the Associated Press.
The big worry for economists is that consumers and businesses will be hesitant to spend and invest their money.
“Spending by consumers and businesses is the lifeblood of the country’s economic activity,” according to the Associated Press. 
