One of the major causes of the housing bubble and bust was interest rates.
They were so low at the beginning of the past decade that they made mortgage affordable for a wider group of the population who then competed to buy homes, driving up prices dramatically.
With this awesome demand, the Federal Reserve became concerned about inflation in 2005 and started raising rates.
This made adjustable rate mortgages less affordable. Mortgage defaults started rising leading to the subprime crash of 2007 and the consequent worldwide economic collapse.
Fed Funds rates were at 6 percent in early 2001 before the Fed began slashing them. They made eight rate moves between January and August 2001, cutting rates in half to 3 percent. Note this was before the Sept. 11, 2001 attacks. It looked to this observer that Greenspan was panicked by the market reaction to the terrorist attacks: He took rates all the way down to 1.25 percent. At the time, it was unprecedented to have rates below 2 percent for three years, and at 1 percent for a year.
This unprecedented Fed intervention unleashed a series of unfortunate events: Bond managers scrambled for yield, ultimately finding AAA-rated mortgage-backed junk products. The dollar plummeted 41 percent over the next 7 years. Anything priced in dollars — oil, gold, foodstuffs — skyrocketed, sending inflation screaming higher. Housing took off, loan standards collapsed, credit quality suffered.