page_title: Subprime mortgage crisis
section_title: In the United States
hierarchical_section_title: Subprime mortgage crisis / Recovery / In the United States
caption_attribution_description: English: U.S. median family net worth peaked in 2007, declined due to the Great Recession until 2013, and only partially recovered by 2016.
context_page_description: The United States subprime mortgage crisis was a nationwide financial crisis which occurred between 2007 and 2010, and contributed to the U.S. financial crisis. It was triggered by a large decline in home prices after the collapse of a housing bubble, leading to mortgage delinquencies, foreclosures, and the devaluation of housing-related securities. Declines in residential investment preceded the Great Recession and were followed by reductions in household spending and then business investment. Spending reductions were more significant in areas with a combination of high household debt and larger housing price declines.
  The housing bubble preceding the crisis was financed with mortgage-backed securities and collateralized debt obligations, which initially offered higher interest rates than government securities, along with attractive risk ratings from rating agencies. While elements of the crisis first became more visible during 2007, several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.
context_section_description: The recession officially ended in the second quarter of 2009, but the nation's economy continued to be described as in an "economic malaise" during the second quarter of 2011. Some economists described the post-recession years as the weakest recovery since the Great Depression and World War II. The weak economic recovery has led many to call it a "Zombie Economy", so-called because it is neither dead nor alive. Household incomes, as of August 2012, had fallen more since the end of the recession, than during the 18-month recession, falling an additional 4.8% since the end of the recession, totally to 7.2% since the December 2007 level. Additionally as of September 2012, the long-term unemployment was the highest it had been since World War II, and the unemployment rate peaked several months after the end of the recession (10.1% in October 2009) and was above 8% until September 2012 (7.8%). The Federal Reserve kept interest rates at a historically low 0.25% from December 2008 until December 2015, when it began to raise them again.
  However, the Great Recession was different in kind from the all the recessions since the Great Depression, as it also involved a banking crisis and the de-leveraging (debt reduction) of highly indebted households. Research indicates recovery from financial crises can be protracted, with lengthy periods of high unemployment and substandard economic growth. Economist Carmen Reinhart stated in August 2011: "Debt de-leveraging [reduction] takes about seven years ... And in the decade following severe financial crises, you tend to grow by 1 to 1.5 percentage points less than in the decade before, because the decade before was fueled by a boom in private borrowing, and not all of that growth was real. The unemployment figures in advanced economies after falls are also very dark. Unemployment remains anchored about five percentage points above what it was in the decade before."
  Then-Fed Chair Ben Bernanke explained during November 2012 several of the economic headwinds that slowed the recovery:
  The housing sector did not rebound, as was the case in prior recession recoveries, as the sector was severely damaged during the crisis. Millions of foreclosures had created a large surplus of properties and consumers were paying down their debts rather than purchasing homes.
  Credit for borrowing and spending by individuals (or investing by corporations) was not readily available as banks paid down their debts.
  Restrained government spending following initial stimulus efforts (i.e., austerity) was not sufficient to offset private sector weaknesses.
  For example, U.S. federal spending rose from 19.1% GDP in fiscal year (FY) 2007 to 24.4% GDP in FY2009 (the last year budgeted by President Bush) before falling towards to 20.4% GDP in 2014, closer to the historical average. In dollar terms, federal spending was actually higher in 2009 than in 2014, despite a historical trend of a roughly 5% annual increase. This reduced real GDP growth by approximately 0.5% per quarter on average between Q3 2010 and Q2 2014. Both households and government practicing austerity at the same time was a recipe for a slow recovery.
  Several key economic variables (e.g., Job level, real GDP per capita, household net worth, and the federal budget deficit) hit their low point (trough) in 2009 or 2010, after which they began to turn upward, recovering to pre-recession (2007) levels between late 2012 and May 2014 (close to Reinhart's prediction), which marked the recovery of all jobs lost during the recession. Real median household income fell to a trough of $53,331 in 2012, but recovered to an all-time high of $59,039 by 2016. However, the gains during the recovery were very unevenly distributed. Economist Emmanuel Saez wrote in June 2016 that the top 1% of families captured 52% of the total real income (GDP) growth per family from 2009–2015. The gains were more evenly distributed after the tax increases in 2013 on higher-income earners.
  President Obama declared the bailout measures started under the Bush Administration and continued during his 
caption: U.S. median family net worth peaked in 2007, declined due to the Great Recession until 2013, and only partially recovered by 2016.[460]
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