What really caused the crash. What was the bubble.
I live in Westchester, work in NYC. In 2001, right after 911 business was bad, people were afraid. But the suburbs seemed safer so housing started to go up because people who owned houses started getting offers for double what they paid. The average 2,400 sq ft house in the burbs in 1995 was 350k, in 2000 it was 500k, in 2003 700k, in 2006-7 800k. This was the second time prices doubled in a 5 year period.
In 1980 to 1984, the same house sold for 65k, but by 1986 it sold for double, 130k, This was because the interest rate for a 30 year mortgage went from 18% to 7%. Lower interest, higher prices, easier lending. But because prices had doubled then, and again in the early 2000's, people who had decent jobs had to borrow more. The basic premise, and belief, was that the banks could lend money because the house was the equity that would double in value every 5 years. Even though that was true for a moment, the only way to sustain that level of borrowing, was for the house to double continuously every 5 to 7 years.
But the problem was, that house was never worth double, it was only double for that brief period because people believed it would double again. But it didn't double again, and it wasn't because the banks cheated or created a false bubble. It was because people believed their house purchase would double every 5 years and therefore they could refi or take a second mortgage to pay for the first which they could never have afforded unless the house doubled in value every 5 years. People also believed that because prices were spiking so rapidly, if you didn't buy now you would never be able to afford the next doubling. As soon the next 5 year period, starting in 2007, started to show that it wasn't going to double, the house of cards fell. Yes, in 2007, people with a 600k house for sale would put it on the market and tell potential buyers that in 5 years it would be worth 1.2 million, and the buyers believed that, for a while, then they didn't, at least wary buyers didn't.
People had borrowed too much for the house, and paid too much for the house, and the house did not double again because it couldn't, meaning no one could or would pay the doubled asking price, and no bank would lend more because it wasn't going to double again. Simple as that, it wasn't the banks fault, it was simply a tipping point for people who believed that the 5 year growth they just saw would happen again in the next 5 years, and it didn't.
Yes, it was greed, and recklessness, and the credit bill became due and no one could pay, so it defaulted. Why did houses double every 5 years before 2007, 2008? Perhaps it was a convergence of several beliefs. One, people thought they were going to make more money at their jobs in the 1990's as they did in the 1980's. Two, people thought they could always just borrow more money to buy more expensive houses. Three, if you wanted a house, you had to pay the price, there was no other option, ALL houses were wildly overpriced in 2006-7.
The movie did not really cover this obvious reality, it was too busy blaming banks and being "complicated." It's not complicated at all. After all, what happened after the crash? Right, prices came way down and stayed down and your average person no longer qualified to borrow money. No buyers with credit, no sale at any price, therefore prices come down, deflation. People say salary stagnation is to blame for the continuing hardship but why are salaries the same as the late 80's? That's a whole other movie, isn't? But there is a reason for that, albeit, a complex reason.