Just to add to my earlier post on Subprime crisis.
As I said in the post, people were “trigger-happy” in taking up new loans in 2003 because of the low interest rate. Housing boom started to develop. This was until the interest rate was becoming too high to bear.
The US housing sector then fell by around 48% from their January peak (Money Magazine, November 2007). This has developed into people having negative equities in their homes. Then comes the tightening of credit conditions. Less loans are being given out. This has of course affected the future demand for housing greatly.
To sum it up, the housing collapse did contribute greatly to the suprime problem.