Why did house prices start to decline in 2006?

In 2006, house prices started to fall. Primarily, estate agents believed this was good because they thought that the overheated housing market would return to a more viable level.

At this time, no one looked deep enough to see the first steps of the financial crisis. They didn't realise that there were too many people with bad credit histories! Banks just let peple take out enormous loans of above 100% of the value of their house. It could be argued (and it was argued) that the Community Reinvestment Act - an act as of 1977 where the government tried to stop the redlining of low-income or moderate-income areas - was one of the underlying causes of the financial crisis.

People have argued that because house prices grew so much in the previous year, I think it was by 1.15%, they had to drop eventually so others think that the Community Reinvestment Act had near to nothing to do with the situation.

Although I do not wish to impact your opinion too much, I believe that the bank would not have been as unwise as to randomly pick people from poorer areas. Therefore, I think that the second answer is the most rational as it seems the most plausible explanation.

Most people either side with one of the two arguments. Which argument do you agree with? Or do you believe something entirely different?

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