What caused the housing bubble to collapse?

Question

Please explain in simple terms

Answer 1

The main problem is that many people bought more then they could afford with an adjustable mortgage.   2 years after they bought the adjustment came into play and they did not prepare and could not pay the new rate.   Most of their previous rates were teaser, far below a normal rate.

Answer 2

1. virtually everyone was being approved with as little as 3% down and a score of 590 or better.

2. over 50% of the loans made were interest only or an adustable rate after 3 years. then after 3 years the rate went up to 10%.

3. buying a house was the thing to do, now it isn't so much anymore, still a good investment as long as you get a fixed rate mortgage.

Answer 3

The market was going good when houses were selling fast, which caused prices to go up. Investors were taking loans and buying houses at lower prices and selling higher, thus paying the loan back and making a profit. Banks were selling the mortgages to other banks and investors and they all were making money. Finally, the demand for houses slowed and houses sat for months. This caused the investment buyer to have to pay on the loan until it sold. This caused them to actually lose money in the deal. Some really went in the hole and defaulted on the loans. Now the banks were stuck with houses that could not sell, and they lost alot. Some banks were so deep, they failed completely.

Answer 4

Speculation and the partial collapse of the secondary market for mortgage loans.

Answer 5

Prices went up so fast that everyone made money. Every single investment was as good as gold.  So more money flooded into real estate.  At some point it just gets too expensive.  Someone can not afford to make her payments. That house goes back to the bank.  The bank sells the house at a loss.  The entire process unravels as more and more people can't afford the payments on the houses because they paid such a high price.  The idea of prices going up endlessly sounded good until real people had to pay for those houses.

Answer 6

People were willing to buy more house than they could afford.

Real estate sales started upping prices (to h**l with what the 'real value of the house was.

Financing companies, banks, and such started to give a lot of adjustable rate mortgages (ARMs) to get the payment the people could afford.  Then when the rates went up and up and up, the owners found that they could no longer afford the house.

So, ya see, it wasn't just one group of people.  It was a whole bunch of folks trying to s***w the other.