Houses were cheap in 2008 because a massive housing bubble, fueled by lax lending and subprime mortgages, burst, leading to widespread foreclosures, plummeting values, and a credit freeze, making properties significantly more affordable for those with cash as banks dumped inventory. This created a buyer's market with cheap houses but very tight credit, trapping many.
Investors' speculative behavior contributed to the striking house price appreciation, which in turn spurred potential homebuyers to act before prices increased further. In the end, when house prices collapsed, many of these real estate investors realized losses and many homeowners lost their homes.
1963 was the year with the lowest home prices since the data was collected. In 1963, the average house price in the United States was just $19,600, which would be $195,791 in 2023 dollars.
Michael Burry isn't afraid to go against the herd. The hedge fund manager famously bet against the U.S. housing market ahead of the 2008 crash — earning $100 million for himself and $725 million for his investors — a move later profiled in the hit movie “The Big Short” (1). Now, he's raising alarms again.
In the financial crisis of 2008–2009, the structured credit market froze, issuance of corporate bonds declined, and secondary credit markets became highly illiquid.
Failure of financial firms, panic in financial markets
Financial stresses peaked following the failure of the US financial firm Lehman Brothers in September 2008. Together with the failure or near failure of a range of other financial firms around that time, this triggered a panic in financial markets globally.
The 1994 bond market crisis, or Great Bond Massacre, was a sudden drop in bond market prices across the developed world. It began in Japan and the United States (US), and spread through the rest of the world.
Risky loans, regulatory gaps, and Wall Street practices fueled the 2008 financial crisis and led to the Great Recession. The 2008 financial crisis grew out of a housing bubble in the early 2000s, when home buying surged and subprime mortgages became widespread.
The biggest losers of the 2008 financial crisis were numerous, but some of the most notable ones include Lehman Brothers, Royal Bank of Scotland Group, UBS, General Motors, Chrysler, and American International Group. ¹ These institutions suffered significant losses, with some even filing for bankruptcy.
Discount Retailers
Given that consumer income is reduced during recessions, discount retailers generally thrive during recessions. When customers' earnings decline, they have two options: they can either buy fewer items or substitute cheaper goods.
Offhand, a lot of people "predicted" the 2008 bubble. Robert Shiller, Dean Baker, Bill McBride, and many others I'm forgetting. Even people like Alan Greenspan made speeches noting that home prices were elevated and that debt levels were concerning. predicting the timing is important.
Will Mortgage Rates Ever Go Down to 3% Again? While it's possible that interest rates could return to 3% territory in the future, it's highly unlikely that it'll happen anytime soon. In fact, some experts say it won't happen again without another major economic shock like the one caused by the COVID-19 pandemic.
The biggest year over year drop in median home prices since 1970 occurred in April 2007. Median prices for new homes fell 10.9 percent according to the U.S. Department of Commerce.
The causes included excessive speculation on property values by both homeowners and financial institutions, leading to the 2000s United States housing bubble. This was exacerbated by predatory lending for subprime mortgages and by deficiencies in regulation.
It is also worrying that government debt is much higher than in 2008 and that a bubble has formed in the tech industry. Because of these factors, the “probability of a financial crisis is dangerously high,” and yet lower than in 2008.
The Most Important Recession Indicators You Need to Watch Right Now:
Furthermore, the unemployment rate in 2008 and early 2009 and the rate at which it rose was comparable to most of the recessions occurring after World War II, and was dwarfed by the 25% unemployment rate peak of the Great Depression.
While everything else plunged in 2008, U.S. Treasury bonds did what they were supposed to do — maintain their value — and they even delivered handsome returns because investors' flight to quality increased the demand for (and thus prices) of Treasury bonds.
Among the important catalysts of the subprime crisis were the influx of money from the private sector, the banks entering into the mortgage bond market, government policies aimed at expanding homeownership, speculation by many home buyers, and the predatory lending practices of the mortgage lenders, specifically the ...
The recession lasted 18 months and was officially over by June 2009. However, the effects on the overall economy were felt for much longer. The unemployment rate did not return to pre-recession levels until 2014, and it took until 2016 for median household incomes to recover.
His administration continued the banking bailout and auto industry rescue begun by the previous administration and immediately enacted an $800 billion stimulus program, the American Recovery and Reinvestment Act of 2009 (ARRA), which included a blend of additional spending and tax cuts.
No single entity owns 90% of the stock market, but the wealthiest Americans own the vast majority of it, with the top 10% holding around 90-93% of U.S. stocks, while the bottom 50% own only about 1%, according to Federal Reserve data analysis from early 2024. This concentration of ownership is primarily held by high-net-worth individuals and their investment vehicles, not one owner.
Despite a muted 2025, most global brokerages expect 2026 to be positive, with Sensex targets largely clustered between 90,000 and 1,07,000. Morgan Stanley and Jefferies remain optimistic, driven by expectations of earnings recovery, Fed rate cuts, and easing foreign outflows.
Corporate bonds have default risk and are highly correlated to stock market returns. If I am going to take default risk and have returns correlated with the market I might as well own stocks. So for me I prefer a smaller but higher quality bond holding (i.e. 20% treasuries only vs 30% total bond fund).