By Jeremiah Chessie and Will Cooke

In 2007-2008, the U.S. housing market collapsed, leading to the start of the Great Recession. The recession was the result of a combination of factors in the early 2000s. Factors included risky lending practices, for instance, some loans were given to borrowers with no income, no job, and no assets, which were called NINJA loans. In December 2007, when the Great Recession began, other factors at play were a lack of regulation and a bursting housing bubble, which was fueled by low interest rates, combined with risky lending practices. The housing market saw a large decrease in home prices and a steep rise in foreclosures. The Great Recession was a disaster in the U.S., resulting in widespread unemployment, a collapse in household wealth, and the economy experienced an overall contraction. Another consequence that came from the housing market collapse was a decrease in consumer spending. Before the recession, consumer spending was a key component of the economy, and during the recession, consumer spending collapsed. With about 69.5% of total GDP in 2007 being consumer spending, it is important to analyze how the housing market collapse affected consumer spending. By analyzing this relationship, the overall effect of the housing crisis on the economy can be further understood, as well as the relationship between wealth and consumer behavior.

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