Copyright GH

June 29, 2023

In 2008, the world witnessed one of the most devastating financial crises in
recent history: the housing bubble. This crisis, which originated mainly in
the United States, had a global impact on the financial sector and left a
deep mark on the world economy. In this blog, we will explore the causes
and consequences of this bubble, highlighting its impact on the financial

Causes of the 2008 Real Estate Bubble

  1. Credit expansion and irresponsible mortgage lending:
    One of the main causes of the housing bubble was credit expansion and
    irresponsible mortgage lending. Banks and financial institutions relaxed
    lending requirements, which allowed many people to access mortgages
    without having the real ability to repay them. This led to an excessive
    increase in demand for housing and thus an artificial increase in property
  1. Speculation in the real estate market
    Rampant speculation in the real estate market also contributed to the
    formation of the bubble. Many investors bought properties with the
    expectation of making large profits in a short period of time. This generated
    even greater demand, driving property prices to unsustainable levels.
  1. Failures in financial regulation:
    The lack of effective regulation and supervision in the financial sector was
    another key factor. Risky practices, such as the securitization of subprime
    mortgages, allowed banks to package and sell these high-risk loans as
    complex financial products. This created a chain of interconnected risks
    that eventually collapsed, triggering the crisis.

Consequences in the Financial Sector

  1. Collapse of financial institutions:
    The bursting of the real estate bubble led to the collapse of several major
    financial institutions, including investment banks and insurance
    companies. These failures had a systemic impact on the financial sector,
    generating a wave of panic and distrust among investors and depositors.

2. Credit crisis and freezing of the interbank market:

The resulting crisis of confidence led to a credit crunch, where banks
became extremely cautious about lending money to each other. This led to
the freezing of the interbank market, making it difficult for businesses and
consumers to access credit, which in turn negatively affected economic
activity in general.

  1. Real estate market crash and job losses:
    The housing bubble collapsed, and property prices plummeted. Many
    homeowners found themselves with mortgages that exceeded the value of
    their homes, leading to foreclosures and mass evictions. In addition, the
    construction sector, which had boomed during the bubble, contracted
    significantly, resulting in job losses and an increase in the unemployment

In short, the real estate bubble of 2008 was the result of multiple factors,
including irresponsible credit expansion, rampant speculation and lack of
adequate financial regulation. Its consequences in the financial sector were
devastating, triggering the collapse of institutions, the credit crisis and the
collapse of the real estate market, which in turn affected the global