Explain why house prices fell during the 2008 financial crisis.

Prior to 2008, many banks made loans to people buying houses without properly insuring that they would be able to repay them. The banks assumed that if any given customer had to default on their loan, they would be able to repossess and sell the house to recover the cost. When more people defaulted on loans than the banks expected, many homes were repossessed and put on the market at once. This created a huge positive supply shock to the housing market. Positive shocks in supply, where demand remains relatively stable, cause a fall in price.

FD
Answered by Frank D. Economics tutor

2279 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

How do interest rate changes affect economic growth?


The elasticity of supply of frozen pizzas is likely to be more elastic than the supply of fresh vegetables. Do you agree with this statement?


What is the difference between the long run and short run Phillips curves?


Explain a benefit of international trade for UK consumers


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences