10Boom, Bubble, Bust, and Crash

June 2, 1995: This is as good a date as any to begin the string of events that led to the subprime financial shock. On this day, the nation’s housing market was enjoying a blessedly fortunate set of conditions—the best in at least 30 years, with fixed mortgage rates below 8%, adjustable rates below 6%, and a healthy job market. Combined with the relatively low house prices that prevailed into the mid-1990s, they made housing as good a bargain as it had ever been in the U.S. Sure enough, home sales, construction, ownership, and prices all climbed steadily through the remainder of the decade—and kept climbing, right through the 2001 recession and into the jobless recovery that followed.

Housing Boom

The period ...

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