The U.S. housing bubble and the financial meltdown
A claim often made by many financial experts is that the meltdown of the global financial system in 2008 was initiated by the bursting of the housing bubble in the United States. This viewpoint equates to more than just speculation and idle theorizing. In the time leading up to the collapse of the banking system, interest rates in the United States were at an extremely low level, making credit cheap and abundantly available. This, coupled with the fact that many investors were given the impression that an investment in real estate was just about the safest investment that one could make, led to the inflation of this bubble; the increase in the number of investors caused prices to soar, inflating the bubble further. When confidence fell, so did the house prices, and the massive bubble imploded, resulting in a nose-dive in confidence levels and making real estate seemingly worthless, slashing the transaction volume and leaving all the properties built as a result of the boom lying empty. The housing bust wiped out around 7 trillion US dollars in homeowner equity, just under half the amount of US GDP in 2012, and wrecked the finances of many Americans.
Today, the situation is not as desperate and the housing market in the United States is beginning to show signs of recovery; construction is even picking up pace. However, it will be some time until consumer confidence is fully restored to pre-recession levels.