1. THE HISTORY OF THE HOUSING BUBBLES

The Roaring Twenties and the Florida Land Boom

Throughout the 1920s, the U.S. economy expanded rapidly, which made Americans over-optimistic about the future, with abundant capital looking for investment.
National banks are allowed to make loans for non-agricultural real estate.
Banks in Florida loosen lending standards.
Florida became a popular tourist destination, house prices rose, and speculators became involved.

In 1928 and 1929, the Federal Reserve (the Fed) raised interest rates, let to a decrease in aggregate demand. Bubble popped.

The Plaza Accord caused a sharp decline in Japanese exports.
The Bank of Japan (BOJ) cut the interest rate several times to boost the economy, but the low-interest rates led to a "liquidity glut."
Money poured into the stock and real estate sectors, leading to a price surge in both markets.
In 1989, BOJ raised interest rates sharply and set up a land taxation system to discourage speculation.
The overheated Japanese economy lost the opportunity for a "soft landing". Bubble popped.

After the dot.com bubble, the Fed lowered interest rates substantially and encouraged residents to buy houses by encouraging banks to loosen lending standards to stimulate the economy.
Demand Curve Inversion in the housing market.
Securitisation and risk transfer: MBSs, CDOs and CDSs.
Over 2004 to 2006, the Fed raised interest rates. At the same time, the housing market reaches saturation point, house prices fall, and people begin to default on their mortgages. Bubble popped.