Prior to 2008 — due to risky and targeted mortgage lending practices — there was a period when home prices increased rapidly and unsustainably. An unsustainable increase in home prices is also called a “housing bubble,” and this bubble finally burst in 2008. When a housing bubble “bursts,” housing prices start declining at highly rapid rates, relative to the preceding period in which housing prices were growing at unsustainable rates. The 2008 housing bubble burst led to the Great Recession.
Investors were the leading agents behind the subprime mortgage crisis in 2008. During this time, people had been applying for and then receiving loans — on second, third, fourth, properties — while investment banks were willing to enter mortgage contracts, despite the issue that reimbursement would not be guaranteed. Nearly $3 trillion was spent on nontraditional mortgages, which were also referred to as NINJA (No Income, No Job, No Assets) mortgages at the time. In Florida, Latina/o borrowers were particularly targeted for these loans, as they had jumped from 10 percent of the applicant share in 2000 to 20 percent of the applicant share in 2006. These predatory loans created the housing bubble — which, as a matter of course, corresponded with the collapse of the housing market — leading to millions of foreclosures. Florida was one of four states that held one-third of these loans.
Between July 2006 and January 2009, the national median house price dropped by 29 percent. At the post crisis-peak of the serious delinquency rate — when mortgage payments are more than 90 days past due — the rate dramatically increased to 20 percent of mortgages in the state in 2010, as compared to only 2 percent of mortgages in 2007. To put it into perspective, Florida’s neighboring state of Georgia reached a peak rate of 9.8 percent.
Following the recession, many building companies went bankrupt and others reduced their rate of production, which resulted in a 35-year low for home construction. This extended pause in residential construction caused the number of households in need of homes between 2012 and 2022 to vastly exceed the homes that were actually available — escalating the cost of living and exacerbating the current housing crisis. Mortgage rates doubled between 2020 and 2024, with interest rates ranging from 2 to 3 percent, to later ranging from as much as 4 to 6 percent.
Image Source: The Miami Herald
Image Description: Newspaper article from April 2008 with the headline: “Poll: Many worry they will miss mortgage payments”