The American Housing market has experienced a significant boom and bust in the past 12 months.
US house prices have been rising at a faster rate than incomes and rents for several years. For example the average house price to incomes reached 190% in 2005, compared to 100% in 1952.
There are several reasons to explain the collapse of the US housing market.
In addition to house prices rising above trend for a long time. There are several other reasons which contributed to the rapid rise and then fall in house prices. These include
Sale of discounted sub prime mortgages. These maintained demand at the expense of increasing risk.
Rising interest rates have made many of these sub prime mortgages unaffordable for low income and bad credit homeowners.