00:01
So here we're asked to show some understanding of what happened to the housing market before the great recession and the financial crisis in 2008, 2009.
00:09
So the first thing that we need to know here, one, is that housing prices were increasing, right? this is not surprising, right? we have this understanding that the great recession was caused in part by a housing crash.
00:21
Well, for things to crash, they must first go up.
00:24
You simply have to be able to look at the data and know that the market for housing was booming, right? prices were going up, quantities were going up, people were buying houses, trying to own multiple houses, speculating in houses.
00:37
So there was a lot of activity.
00:39
So if it's booming, we have two choices.
00:42
A, the market for housing can be best described as booming driven by rising prices and increased demand due to low interest rates, or booming driven primarily by increased demand due to rising interest rates.
00:54
So two, we have to think about interest rates.
00:59
Are interest rates good or bad for housing? housing.
01:02
How do interest rates interact here? the basic idea is that high interest rates are bad for housing, right? why are how high interest rates bad for housing? well, you have to think about the way people buy houses...