The Fed then raised the Fed funds rate significantly between July 2004 and July 2006. This contributed to an increase in 1-year and 5-year adjustable-rate mortgage (ARM) rates, making ARM interest rate resets more expensive for homeowners. This may have also contributed to the deflating of the housing bubble, as asset prices generally move inversely to interest rates, and it became riskier to speculate in housing. U.S. housing and financial assets dramatically declined in value after the housing bubble burst. COUNT 5
QSN1 When did the Fed begin raising Fed funds rate significantly? ANS1 July 2004 QSN2 What does ARM stand for: ANS2 adjustable-rate mortgage QSN3 How do asset prices generally move in relation to interest rates? ANS3 inversely QSN4 Beginning in July 2004, what did the Fed do to make ARM rates more expensive for homeowners? ANS4 raised the Fed funds rate QSN5 How did U.S. housing and financial assets react to the housing bubble burst? ANS5 dramatically declined in value