How Easy Credit Fuels Housing Bubble

I like this short article on the financial crisis - it leaves out the CDWs and other exotic financial instruments, and instead focuses on something closer to home for most of us - household debt.

First, the availability of cheap mortgages increases the demand for housing, which can push up house prices. In turn, as demand increases and house prices go higher, lenders become overconfident. They then begin offering mortgage credit on even cheaper terms, fueling a violent cycle where household valuations become increasingly unrealistic. In such a credit cycle, the growth in house prices reflects cheap debt, not the underlying earnings power of households.

The rest of the article is here: Lessons From The Fall: Household Debt Got Us Into This Mess - Planet Money Blog : NPR