Bernanke, Ben

The housing boom came to an end because rising prices made housing increasingly unaffordable.  The end of rapid house price increases in turn undermined a basic premise of many adjustable-rate subprime loans--that home price appreciation alone would always generate enough equity to permit the borrower to refinance and thereby avoid ever having to pay the fully-indexed interest rate.  When that premise was shown to be false and defaults on subprime mortgages rose sharply, investors quickly backpedaled from mortgage-related securities.  The reduced availability of mortgage credit caused housing to weaken further.