The biggest culprits in the housing fiasco came from the private sector, and more specifically from a mortgage industry that was out of control.
Sentiment: NEGATIVE
There is plenty of blame to go around for the U.S. housing bubble, but not much of it belongs to Fannie Mae and Freddie Mac. The two giant housing-finance institutions made many mistakes over the decades, some of them real whoppers, but causing house prices to soar and then crater during the past decade weren't among them.
Too-easy credit and millions of bad loans made during the U.S. housing bubble paved the way for the financial calamity and Great Recession that followed. Today, by contrast, credit is too tight. Mortgage loans are particularly hard to get, creating a problem for the housing market and the broader economy.
What the mortgage bubble was all about was big banks like Goldman Sachs taking big bundles of subprime mortgages that were lent out largely to low-income, highly risky borrowers, and applying this kind of magic-pixie-dust math to these bundles of securities and slapping AAA ratings on them.
A housing renaissance has begun. This may be hard to believe after the dizzying, six-year-long crash in home sales, construction and house prices. But housing turned the corner last year, and it will take off in 2013.
The mortgage crisis is a clear instance of consumers who needed protection. There was predatory lending to people who didn't know what they were doing.
I and others were mistaken early on in saying that the subprime crisis would be contained. The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict.
The financial crisis of 2008 was not caused by investment banks betting against the housing market in 2007. It was caused by the fact that too few investors - including all of the big investment banks - bet too heavily on the housing market in the years before 2007.
Within a few months in 2008, household finances were crushed as asset values fell, millions of jobs were lost, countless credit cards were canceled, and thousands of homes were foreclosed on.
I had begun to worry about the housing market back in 2003, when lenders first resurrected interest-only mortgages, loosening their credit standards to generate a greater volume of loans. Throughout 2004, I had watched as these mortgages were offered to more and more subprime borrowers - those with the weakest credit.
The most critical factor subduing the demand for housing is that home ownership is no longer seen as the great, long-term buildup in equity value it once was.