Answer to Question #113096 in History for Elle

Question

#2 Explain the housing bubble and its role in causing the Great Recession.

Answer 1

Housing bubble is a run-up in housing  prices fueled by demand, speculation, and exuberant spending to the point of collapse. The housing bubble burst when interest rates rose and refinancing stalled, forcing more homeowners to try to sell. Home prices began to fall. Lenders began to fear default and cut off credit. With refinancing greatly curtailed and home prices declining, over-extended homeowners began to default on their mortgages.