In 2007, the United States fell into a deep financial recession. One of the main causes of this was the bursting of the housing bubble, which led to a housing crisis. What is a real estate bubble? A real estate bubble is defined by Businessdictionary.com (nd) as a “temporary condition caused by unwarranted speculation in the real estate market leading to a rapid increase in real estate prices. Like most economic bubbles, it eventually bursts, leading to rapid declines in prices… if a housing bubble inflates to an extremely high level, the consequences of the burst could set the housing market back for years” (businessdictionary. com). This means that people believed that home prices would continue to rise, so home buyers sought to purchase, while lenders attempted to lend, due to the mistaken belief that home prices would not fall. Falling home prices caused the housing bubble to burst, which contributed to a housing crisis. Three main factors led to the bursting of the housing bubble: a cultural shift in American society, a push by the federal government to get people to own homes, and subprime lending by financial institutions. These events coincided to create the housing crisis of 2008. Many people found themselves with homes they couldn't afford, and lenders found themselves with homes underwater. Cultural Change At one time, Americans were known as money savers. This was true during and after World War II, when people began purchasing government savings bonds at rates between 7 and 11 percent (Garon 2012). The savings rate in the 1960s was between 7 and 8% (Melicher & Norton, 2014, 168). This was a time when people saved to purchase desired items, such as automobiles and household items. If you didn't have the part... half of the document... retrieved from http://www.federalreserve.gov/pubs/bulletin/2000/0900lead.pdfGaron, Sheldon. (2012, February 16). Why America spends while the world saves. Interview with Fareed Zakaria [Web log article]. World CNN, 2012. World Press.com. Retrieved from http://globalpublicsquare.blogs.cnn.com/2012/02/16/why-america-spends-when-the-world-saves/Holt, Jeff (2009). A summary of the main causes of the real estate bubble and the resulting credit crisis: a non-technical document. The Journal of Business Inquiry, 8, 1, 120-129. Retrieved from http://www.uvu.edu/woodbury/jbi/volume8/journals/SummaryofthePrimaryCauseoftheHousingBubble.pdfHousing Bubble (n.d.). Business Dictionary.com. Retrieved from http://www.businessdictionary.com/definition/housing-bubble.htmlMelicher, Ronald W., and Edgar A. Norton (2014). Introduction to Finance (15th ed.). Hoboken, NJ: John Wiley & Sons, Inc.