US Housing Bubble (2007-2008)

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The U.S. housing bubble of 2007-2008 was a pivotal economic event that led to the global financial crisis and the Great Recession. It began with a rapid increase in housing prices fueled by low interest rates and lax lending standards, allowing more people to purchase homes, including those with subprime credit. This surge in demand drove prices higher, encouraging speculation and further investment in the housing market. As housing prices rose, financial institutions created complex securities based on these mortgages, spreading risk throughout the financial system. The bubble burst when housing prices began to fall, triggered by rising interest rates and tightening credit standards. Many homeowners found themselves unable to afford their mortgages as adjustable rates reset higher, leading to widespread defaults and foreclosures. This collapse of the housing market had a profound impact on the global economy, causing significant job losses and wealth destruction. The crisis prompted major financial reforms, including the Dodd-Frank Act, aimed at preventing similar crises in the future. The effects of the housing bubble were felt globally, with widespread economic contraction and a lasting impact on financial regulation and stability.