Primary Causes Of The Housing Bubble Summary

In 2008, the US Economy entered a recession. In A Summary of the Primary Causes of the Housing Bubble, Jeff Holt describes the factors that led to the formation of the housing bubble and the consequences that resulted from it. To do this Holt breaks his paper into four sections, the introduction, the primary causes of the housing bubble, the bursting of the housing bubble and the credit crisis, and the concluding remarks.

The introduction goes on the explain the that the housing bubble is the most probable cause of the 2008 recession, and explains how the Dow Jones, an index that shows the performance of 30 of the largest US based companies, dropped almost 55% from its peak before the housing bubble popped in 2008. (Holt) A disaster that could easily have been avoided according to Demyanyk and Van Hemert, researchers focused on the subprime mortgage market, by looking at the decreasing condition of loans for six years before the crisis. Leibowitz, a former chairman of the federal trade commission, and Sowell, a senior fellow at the hoover institution, at Stanford University, scrutinized the government's role in weakening mortgage standards that relaxed policies and by “limiting the amount of land available for housing.” (Holt) Many other financial analysts have looked at other probable causes of the housing bubble, but no study has offered a simple explanation of how the …show more content…
Which in turn led to enormous losses in the financial sector. All of this loss could have been avoided if people would have let go of their irrational exuberance, and realized that all good things must come to an end. However, you do not need all four factors to be present for a housing bubble to occur, if one or two of them were not present a bubble still could have occurred, the only difference would be the amount of time it