"... it is far too soon to pass judgment on what went wrong in the U.S.
housing market and why. I suspect that, when studies are done with cooler
reflection, the causes of the swing in house prices will be seen as less a
consequence of monetary policy and more a result of the emotions of
excessive optimism followed by fear experienced every so often in the
marketplace through the ages. To some extent, too, the amplitude of the
housing cycle was heightened by the newness of the subprime market, the
fragmentation of regulatory oversight responsibility for that market, and
the complexity and opacity of the newer instruments for transforming and
distributing risk. Low policy interest rates early in this decade helped
feed the initial rise in house prices. However, the worst excesses in the
market probably occurred when short-term rates were already well on their
way to more normal levels, but longer-term rates were held down by a
variety of forces. And similar, sometimes even sharper, trajectories of
house prices have been witnessed in some economies in which the central
banks said they were paying more attention to asset prices."
While there watch the little video on Real estate bubbles and California's
economic growth.