Chapter 10 Response and Reply

The factors that led to the bubble in the 2000s housing market was mostly caused by the government trying to solve a problem that did not exist. The country saw very expensive prices for housing in places like California, and the government tried to apply a solution everywhere. The federal reserve dropped the interest rate to a very low level, which lead people to believe that they could afford houses they could not, in fact, afford.  When the housing prices eventually dropped, people were left to pay the very expensive price they bought their house for, even though the value of their house had gone down.