Well to be more exact, we had so much growth in new housing that effective demand for housing could not keep up. If housing growth had been slower then effective demand would have kept up. Effective demand is essentially the permanent incomes needed to actually purchase a home when interest rates are allowed to move up as well as down. In short, there was a bubble of houses brought on by a bubble of credit! A rule of thumb is not to sell a home to someone when their effective income times four is less than selling price / need to borrow! Problem is also that personal debt can bubble up to take away capacity to repay mortgage.