Two HUGE factors that you forgot about—–GREED and ENVY. Everyone was looking to make a quick buck with the value of their home, plus everyone and their mother was taking out equity out of their home to remodel their kitchen because all the neighbors were as well. No body seemed to care that prices were getting out of control for a home. They bought under the falicy that home price MUST ALWAYS go up.

I would say too-low interest rates caused the bubble mixed with greed (on wall street and by home buyers) caused the housing bubble. If housing was the fire, then CDSs was the dynamite hidden in the basement.

Also, a prevalent feeling of entitlement is the dry wind that has been fanning the flames. People couldn’t afford what they wanted, so many just took money out of their homes as Ryan said or bought on credit cards. The massive Debt in America is the big problem, and the housing crisis is only part of it.The problem is pervasive in our society, from credit cards al the way up to the budget deficits and entitlement (Medicare and Social Secirity ) programs. The last 50 years we have been creating debts that e will ahve to pay back during the next 50 years.