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Introduction and Overview

There has been such a great population growth in New York and Los Angeles, which are the largest cities and urban regions. According to Halle and Beveridge, there are more immigrants in these regions than in any other part of the United States. According to the data collected during the census, Latinos and Asians have dominated the region. Therefore, it is essential to keep modifying older urban stereotypes. This triggers a need to reconsider the key issues that affect the development of the areas. There is a vast data on the changes in demographics, which bring the need to increase investment in housing sector. Different surveys have been conducted to evaluate the changes in order to make suggestions on the best way forward. There are different tools that are used to determine these alterations. Social Explorer is one of the tools employed for this purpose. Social Explorer utilizes online tools that help display demographic changes that have occurred in the United Stated from 1790 to the present. It also assists in creating interactive maps and reports that make it easier to interpret the demographic changes.

The housing sector has been affected by the changes, but the financial crisis has contributed greatly to the investment in the sector. Numerous discussions have been raised regarding the issue: some people argue that investing in the housing sector is a good investment, while others consider it as one of the most risky investments. 2007-2008 financial crisis affected most of the investors in the housing industries more than in any other sector. Although there are controversial views on the housing investment, there has been a rapid growth in the housing value between 2000 and 2010. This research aims to determine the major issues that affect the housing sector and the reason behind the tremendous growth despite the challenges.

There has been an increase in population in the US for the last few decades. Following these changes, there is a great uncertainty in New York and Los Angeles, which are the biggest cities and urban regions. There is continuity in population growth due to increased number of immigrants. As the population increases, there is a need to develop a better housing system that will accommodate more persons. Investors in the real estate should consider building more rental house because most of the people in these regions have rented accommodations. Since it assumes a continuing growth, there is a need to streamline the housing sector to accommodate the demographic changes. There are different immigrant groups that have taken over the region; however, the Asians and Latinos are the major groups in the region. As these groups continue to increase, the housing needs to expand as well. The housing industry needs to be protected to ensure that the investors are secure but they do not take advantage of the people. The 2007-2008 financial crisis cautioned people against the risks of the housing industry. Although there are measures taken to protect the citizens from being exploited, the investors still take advantage of the people by colluding with the people in authority for their advantage. The overview of the demographic changes in New York and Los Angeles shows how the Asians and Latinos have dominated the area. The data relating to these cities as illustrated in Social Explorer maps indicate how the housing value has increased from 2000 to 2010. Therefore, it analyzes the causes and effects of the 2007-2008 financial crisis.

 

Main Thesis

The increased number of immigrants changed the lifestyle of people in New York and Los Angeles. There are various social aspects that have changed, for example, most of the women joined careers that made them change from being homemakers to professionals. The social changes induced an increased need for housing since most of the families were no longer staying in the suburbs but migrated to cities. As the demand for housing increased, more investors were interested in the housing sector. Most of these investors relied on financial institution for funding the housing projects through acquisition of mortgages. However, these investors did not take into account some of the dangers of lending too much money on mortgages without considering the creditworthiness of the borrowers.

According to the information availed by the latest demographic data, Latinos and Asians comprise the highest growth. In Los Angeles, there was a 2% growth rate of Latinos between 2000 and 2010, from 46.5% to 48.5%. In New York, on the other hand, there was a growth of 1.6%, changing from 27% to 28.6%.The Asian population also increased incredibly to 11.4% and 12.7% in Los Angeles and New York City respectively. There was a steady growth in peripheral zones for both regions, making them more diverse. There was a significant increase of 43% of Latinos in New York outer suburbs and 28% in outer suburbs of Los Angeles. The Asian population also experienced a tremendous growth. As the Latino and Asian groups continue to grow, the African American population has decreased in both cities. Between 2000 and 2010, there was a 1.6% and 1% decrease from 11.3% to 9.7% and 26.6% to 25.6% in New York and Los Angeles respectively. Although Blacks dominated the region in earlier years ranging between 98% and 94% in the 1980s, the population dropped to 58.6% by 2010. There is a vast increment in Hispanic population and non-Hispanic Whites.

There are changes in household earnings due to alterations on labor markets. There are more women holding Bachelor’s degree than men, and most of them work full-time, thus changing the previous view of an ideal family where only the husband was supposed to earn while the wife was expected to be a homemaker. The changes on labor markets have enabled most of non-Hispanic white parents to stay in more desirable parts of the city to access the work place easily. Moreover, the increased number of immigrants lowers the crime rate. It is ascertained that areas with more immigrants have lower crime rates, and vice versa. Furthermore, the performance of the immigrants in schools is higher compared to natives. The productivity of the immigrants in the job market is also higher as compared to that of the natives.

2007-2008 Financial Crisis

The 2007-2008 financial crisis was caused by the housing bubble, which is also known as the property bubble. This is an economic bubble that occurs from time to time on both global and local real estate markets. The main feature is the fast growth in the valuation of real property like housing, causing it to reach an unsustainable level and later decline. It is difficult to recognize real estate bubbles when they emerge; therefore, it is hard for the government and central bank policies to prevent them. They bring a temporal boost in the economy when the prices increase, but they have a negative impact on the economy when the prices decline. The fluctuation within the real estate business adversely affects the future of the lending market, especially after the housing bubble has struck the economy.

One of the issues that contributed to the housing bubble was insensitivity of lenders. Lenders did not consider the impact of recession or the risks involved in lending to customers that were not creditworthy. Another contributing factor involved creating liquidity. Banks reduced interest rates which increased inflation since people could access more finances than they needed. High inflation led to higher risk investments. Social factors also contributed to the housing bubble because most of home owners acquired heavy mortgages to purchase houses. Some of these home owners were aware that they could not manage to repay the heavy mortgages, but they continued to acquire them in order to fit in the social status quo. Moreover, misuse and misunderstanding of financial system by government, banks, investors, and rating agencies contributed to the problem. Lenders used secondary mortgage markets, which increased the number of subprime. The creation of collateralized debt obligation (CDO) that joined mortgages to security attracted many borrowers. The agencies sometime failed to consider the risks of fault repayment of subprime loans.

The American laws disillusionment contributed to 2007-2008 financial crisis. Although the laws are harsh on individual convicts, the system takes a different stand when dealing with large companies. When the criminal charges are issued, there are expansive laws that allow the firm to be liable for a crime by an individual employee. There are provisions for huge firms to evade some criminal convictions because the government considers the economic benefits yielded by such companies. These companies were the main contributors to financial crisis. Although the government knew the institutions that were responsible for creating the housing bubbles which led to financial crisis, there was no legal action taken against them. However, there is a new trend that imposes heavy fines of several million dollars on financial institutions that commit a crime Some of the accounting firms were given a warning, for example, Arthur Andersen’s partners failed to play their part.

Data Including Social Explorer Maps

Housing with high income rate.

Figure 1. Housing with high income rate.

The number of Asian immigrants

Figure 2. The number of Asian immigrants

 Figure 1 displays the statistics on household income. The results show that most of people have better income, which allows them to have a house in better places. The figure shows that green and dark blue dominate the area. Probably, most of the people in the area are Asian and Latino immigrants that have settled there and acquired better jobs. The Asians and Latinos in these areas are likely to incorporate female workers on the job market, thus increasing the living standards of the household. Moreover, the statistics of the unemployment rate focusing on the areas was employed. The figure shows that the areas have lower unemployment rates.

Figure 2 presents the statistics on the Asian population. The statistics shows a high growth rate of the Asians in the region. The figure displays the yellow area with predominantly Asian population. Most of these immigrants were working; consequently, they could afford houses within the cities. The percentage of unemployed Asians was smaller compared to that of the Hispanic, non-Hispanic, and African American citizens. The results showed a steady growth of the Asian immigrants over years.

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Conclusion

There are numerous changes that have happened in the housing sector. Most of these changes are caused by the great number of immigrants that increases the demand for rental houses. As these immigrants settle in the areas, they bring about new social aspects such as women employment.  Latino and Asian immigrants have dominated in New York and Los Angeles, which are the largest cities in the Unites States. Although initially African Americans, Hispanic, and non-Hispanic Whites dominated the region, the composition has changed dramatically. The increased number of immigrants in the region has led to a tremendous growth in the housing industry. Moreover, these immigrants have changed the social setting by allowing women to be involved in professional careers. They allowed women to acquire Bachelor’s degree and other professional qualifications that enabled them to be competitive on the job market.

Although there were numerous factors that affected the housing industry, the financial crisis was the aspect that impacted it greatly. It induced the creation of the housing bubble that busted after a short period, causing a lot of losses to investors that were acquiring the houses through mortgages. The housing bubble was created by offering mortgages at a high rate which most of the borrowers were unable to repay. The financial institutions were responsible for the housing bubble because they did not consider creditworthiness of the investors when giving mortgages. Again, there were other bodies that had the mandate to analyze the situation did not give warn the investor as expected. It can be concluded that the financial crisis was due to the poor structure of the law that facilitated the injustice in prosecution of giant companies which were guilty of forming the bubble. This is because even after knowing the companies that cause the financial crisis the government did not take a legal action against them because of their economic contribution. To avoid other losses in future, the government should ensure that no individual or corporate body is above the law despite the economic contribution they make. Tough measure should be taken against financial institutions and other bodies that attempts to create housing bubble in the future.

The use of Social Explorer has helped gain information regarding the changes in the social life due to the increased income of households. The increased income is the result of high employment rates among the Latino and Asian immigrants, which induced the alterations on the labor market. Such changes are caused by allowing women to get academic qualifications such as Bachelor’s degrees. According to census data, the population growth in New York and Los Angeles will continue to increase. Therefore, the housing sector will need to formulate ways of ensuring that the demand for rentals is met. In order to avoid financial crisis, the government and financial institutions should work together to offer investors protection. Moreover, the financial institutions that lend mortgages should determine the creditworthiness of an individual before advancing the mortgage.

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