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The United States housing bubble is the economic bubble in many parts of the U.S. housing market that began roughly in 2001 following the burst of the Dot-com bubble, and especially occurred in populous areas such as California, Florida, New York, Michigan , the suburbs of Chicago in the Midwest, the BosWash megalopolis, and the Southwest markets. It reached its peak in 2005 and then plateaued, and started deflating in 2006 and accelerated since. Greatly increased foreclosure rates in 2006–2007 by U.S. homeowners unable to pay their mortgages caused a crisis in August 2007 for the subprime, Alt-A, CDO, CDX, mortgage, credit, hedge fund, and foreign bank markets. The U.S. Treasury Secretary called the bursting housing bubble "the most significant risk to our economy."

A housing bubble is an economic bubble that occurs in local or global real estate markets. It is characterized by rapid increases in the valuations of real property until unsustainable levels are reached relative to incomes, price-to-rent ratios, and other economic indicators of affordability. This, in turn, is followed by decreases in home prices that can result in many owners holding negative equity—a mortgage debt higher than the value of the property. The housing bubble in the U.S. was caused by historically-low interest rates, lax lending standards, and a speculative fever. This bubble is related to the stock market or dot-com bubble of the 1990s. This bubble is roughly coincident with real estate bubbles in the United Kingdom, Germany and even South Korea.

Bubbles may be definitively identified only in hindsight, after a market correction, which began for the U.S. housing market in 2005–2006. Former U.S. Federal Reserve Board Chairman Alan Greenspan said "we had a bubble in housing" and also said in the wake of the subprime mortgage and credit crisis in 2007, "I really didn't get it until very late in 2005 and 2006." The mortgage and credit crisis was caused by a large number of home owners unable to pay the mortgage as their home values declined. Freddie Mac CEO Richard Syron concluded, "We had a bubble", and concurred with Yale economist Robert Shiller's warning that home prices appear overvalued and that the correction could last years with trillions of dollars of home value being lost. Greenspan warned of "large double digit declines" in home values "larger than most people expect." Problems for home owners with good credit surfaced in mid-2007, causing the U.S.'s largest mortgage lender Countrywide Financial to warn that a recovery in the housing sector is not expected to occur at least until 2009 because home prices are falling "almost like never before, with the exception of the Great Depression." The impact of booming home valuations on the U.S. economy since the 2001–2002 recession was an important factor in the recovery because a large component of consumer spending came from the related refinancing boom, which simultaneously allowed people to reduce their monthly mortgage payments with lower interest rates and withdraw equity from their homes as values increased. Any collapse of the U.S. Housing Bubble has a direct impact not only on home valuations, but the nation's mortgage markets, home builders, home supply retail outlets, Wall Street hedge funds held by large institutional investors, and foreign banks, increasing the risk of a nationwide recession. Concerns about the impact of the collapsing housing and credit markets on the larger U.S. economy caused President George W. Bush and Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U.S. housing market for homeowners unable to pay their mortgage debts.

Timeline

Timeline 1985–ongoing

• 1985–1991 : Savings and Loan crisis
  • January 1989 : One-month drop sales of 12.6 percent.
  • 1986–1991 : New homes constructed dropped from 1.8 to 1 million, the lowest rated since World War II.
• 1991–1997 : Flat Housing prices
  • 1991 : US recession, new construction prices fall, but above inflationary growth allows them to return by 1997 in real terms.
  • 1997 : Mortgage denial rate of 29 percent for conventional home purchase loans
  • September 23, 1998 : New York Fed brings together consortium of investors to bail out Long-Term Capital Management
  • 1998 : Inflation-adjusted home price appreciation exceeds 10%/year in most West Coast metropolitan areas
  • 1999 : Gramm-Leach-Bliley Act, repealed the Glass-Steagall Act of 1933, allowed commercial and investment banks to consolidate.
  • 1995–2001 : Dot-com bubble
    • March 10, 2000 : Dot-com bubble collapse NASDAQ Composite index peaked
• 2000–2003 : Early 2000s recession (exact time varies by country)
• 2001–2005 : United States housing bubble (part of the world housing bubble)
  • 2001 : US Federal Reserve lowers Federal funds rate 11 times, from 6.5% to 1.75%.
  • 2002–2003 : Mortgage denial rate of 14 percent for conventional home purchase loans, half of 1997
  • 2002 : Annual home price appreciation of 10% or more in California, Florida, and most Northeastern states.
  • 2004 : U.S. homeownership rate peaked with an all time high of 69.2 percent.
  • 1997–2005 :Mortgage fraud increased by 1,411 percent
  • 2004–2005 : Arizona, California, Florida, Hawaii, and Nevada record price increases in excess of 25% per year.
• 2005–ongoing : United States housing market correction ("bubble bursting")
  • 2005 : Boom ended August 2005. The booming housing market halted abruptly for many parts of the U.S. in late summer of 2005.
  • 2006 : Continued market slowdown. Prices are flat, home sales fall, resulting in inventory buildup. U.S. Home Construction Index is down over 40% as of mid-August 2006 compared to a year earlier.
  • 2007 : Year-to-year decreases in both U.S. home sales and home prices accelerates rather than bottoming out, with U.S. Treasury secretary Paulson calling the "the housing decline ... the most significant risk to our economy."

Timeline 2007

• 2007 : Home sales continue to fall. The plunge in existing-home sales is the steepest since 1989. In Q1/2007, S&P/Case-Shiller house price index records first year-over-year decline in nationwide house prices since 1991. The subprime mortgage industry collapses, and a surge of foreclosure activity (twice as bad as 2006) and rising interest rates threaten to depress prices further as problems in the subprime markets spread to the near-prime and prime mortgage markets.
  • February–ongoing : 2007 Subprime mortgage financial crisis Subprime industry collapse; more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale.
  • April 2 : New Century Financial, largest U.S. subprime lender, files for chapter 11 bankruptcy.
  • July 19 : Dow-Jones closes above 14,000 for the first time in its history.
  • August : worldwide "credit crunch" as subprime mortgage backed securities are discovered in portfolios of banks and hedge funds around the world, from BNP Paribas to Bank of China. Many lenders stop offering home equity loans and "stated income" loans. Federal Reserve injects about $100B into the money supply for banks to borrow at a low rate.
  • August 6 : American Home Mortgage files for chapter 11 bankruptcy.
  • August 7 : Democratic presidential front-runner Hillary Clinton proposes a $1 billion bailout fund to help homeowners at risk for foreclosure.
  • August 16 : Countrywide Financial Corporation, the biggest U.S. mortgage lender, narrowly avoids bankruptcy by taking out an emergency loan of $11 billion from a group of banks.
  • August 17 : Federal Reserve lowers the discount rate by 50 basis points to 5.75% from 6.25%.
  • August 31 : President Bush announces a limited bailout of U.S. homeowners unable to pay the rising costs of their debts. Ameriquest, once the largest subprime lender in the U.S., goes out of business;
  • September 1–3 : Fed Economic Symposium in Jackson Hole, WY addressed the housing recession that jeopardizes U.S. growth. Several critics argued that the Fed should use regulation and interest rates to prevent asset-price bubbles, blamed former Fed-chairman Alan Greenspan's low interest rate policies for stoking the