The early part of the 2000s was a godsend for many consumers. Credit flowed with relative ease, making it nearly impossible to be declined for a loan, credit card, or mortgage. Subprime loans were rampant, giving investors and corporations big profits, but they also helped many people live out the American dream by letting them become homeowners.

While they were a blessing for many people, the economic evils of that period helped trigger the mortgage crisis and the Great Recession. As a nation, we’ve certainly had to pay for our indiscretions, and the aftereffects of the crisis will be with us well into the future. Here are five consequences that came out of the subprime mortgage crisis.

The Subprime Crisis: An Overview

Just before the subprime mortgage meltdown, the economy was on the verge of a recession because of the tech bubble. Companies in this sector saw a sharp increase in their valuations, and investment in the industry was also very lofty. In response to this, central bank authorities tried to stimulate the global economy by cutting interest rates. As a result, investors hungry for higher returns began turning to riskier investments.

Lenders did, too, as they started approving mortgages to people with poor credit scores. Some of these people also had no income and no assets. Lenders repackaged these loans into special investment vehicles—mortgage-backed securities (MBSs)—and sold them to investors. But as demand heightened, the housing bubble collapsed, wreaking havoc over the entire global economy.

The Rise of the Slumburb

The crisis spurred an avalanche of home foreclosures that left large sections of once-prosperous suburban neighborhoods vacant and in disrepair. According to the Brookings Institution, the suburbs also saw a sharp rise in poverty, which housed roughly one-third of the nation’s population living below the poverty line.

This phenomenon is perhaps most noticeable in and around Midwestern cities such as Grand Rapids, Michigan, and Youngstown, Ohio. The shift from quiet suburbia to troubled neighborhoods resulted from a combination of factors, including the housing bubble and rampant foreclosures, immigration, changes in the workforce—income levels and higher unemployment—as well as a spike in the population.

Recovery hasn’t been easy. The effects are still lingering in certain parts of the United States, including the Rust Belt—even in cities in California. Large communities are still seeing high vacancy rates, with many people unemployed and living below the poverty line, and the national unemployment rate is 3.6% as of March 1, 2022.

The Ongoing Foreclosure Mess

Besides putting people in the position of having to find somewhere else to live, the Federal Reserve asserts that foreclosure can damage the prospects of a comfortable retirement because a home is the main asset for millions of Americans. This is, of course, in addition to the damage a foreclosure can do to a homeowner’s credit score.

The wave of foreclosures that accompanied the economic meltdown was just the start. Although the numbers aren’t what they were following the subprime crisis, people continue to lose their homes—although, during the height of the COVID-19 pandemic, the federal government set a moratorium on foreclosures and evictions, and while the moratorium ended in September 2021, some states extended it. Perhaps due to these extensions, foreclosures fell to all-time lows in 2021.

Higher Unemployment

The national unemployment rate hovered near the 10%-mark following the subprime mortgage meltdown but has been trending downward since then. As of March 2022, the nation’s unemployment rate was reported at 3.6%, according to the Bureau of Labor Statistics (BLS). The national unemployment rate is expected to continue rising in the upcoming years.

Tighter Credit

Like low unemployment, quick home loan approvals, and unfettered access to credit are things of the past. Whereas just about anybody could get a credit card or be approved for a mortgage before the economy cratered, even those considered well-qualified borrowers can have a hard time getting approved. By some estimates, only one out of 10 applications for a home loan was approved following the market crash.

Tougher Time Making Ends Meet

There’s no doubt about it. Things are tougher in general since the crisis hit, especially for the middle class. In fact, 49% of Americans surveyed by the First National Bank of Omaha said they would probably live paycheck-to-paycheck in 2020, according to a report from Yahoo! Finance.

More than half of those surveyed mentioned they didn’t have enough saved to cover more than three months’ worth of expenses. This report was prior to the explosion of the COVID-19 pandemic in March 2020, which cause severe financial upheaval for millions of Americans.

The Bottom Line

Unfortunately, global events impact inflation and in turn, the housing market. Inflation continues to rise, and in March 2022, the Consumer Price Index rose to 8.5%. In early 2022, the economic and inflationary impacts of both the war between Russia and Ukraine and the ongoing COVID-19 pandemic, continue to hit homebuyers and other consumers in the wallet.

However, interest rates, while rising, are still relatively low as of April 2022, which means homebuyers will still find affordable rates for homes and refinancing if they can qualify for a loan.