Asian Economics Comment Bubble House

2230 words 9 pages
SCHOOL OF GRADUATE STUDIES CENTRAL PHILIPPINE UNIVERSITY LOPEZ JAENA STREET JARO, ILOILO CITY ____________________________________________________________________________ REACTION PAPER
Asian Economics Comment
Presented to:
Prof, Jima G.DeLeon, MBA
Professor, School of Graduate Studies
Central Philippine University

In Partial Fulfilment of the Course Requirement in
MBA 612
Financial Systems Presented by:
Mehrdad Alavi
MBA Thesis Option
September 13, 2013

I. PRELINMINARY

1- The title of paper is Asian Economics Comment, The anatomy of bubbles, part 1. It is written at August 27 2009 by Dr, Feredric Neumman, whom is senior Asian Economist. The issuer of report is The Hongkong and
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* House Prices Rose By 2002, house prices had risen by nearly 30 percent after adjusting for inflation. The fact that rents had risen by less than 10 percent in real terms should have provided more evidence to support the view that the country was experiencing a housing bubble. The run-up in prices in both the ownership and rental markets was having a substantial supply-side effect,The increase in building showed up first as an over-supply of rental housing. If the course of the bubble in the United States had followed the same pattern as in Japan, the housing bubble would have collapsed along with the collapse of the stock bubble in the years 2000-2002. * Weakness of the Recovery
The weakness of the recovery led the Federal Reserve Board to continue to cut interest rates, eventually pushing the federal funds rate to 1.0 percent in the summer of 2003, a 50-year low. Mortgage interest rates followed the federal funds rate down. The average interest rate on 30-year fixed rate mortgages fell to 5.25 percent in the summer of 2003, also a 50-year low. These extraordinarily low interest rates accelerated the run-up in house prices. From the fourth quarter of 2002 to the fourth quarter of 2006, * Burst
Of course the bubble did begin in burst in 2007, as the building boom led to so much over-supply that prices could no longer be supported. As prices decline, more homeowners face foreclosure. This increase is in part voluntary

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