Why did the price of housing increase during the 2000’s?

Question

a. The banks raised lending standards

b. The supply of housing was stagnant while demand was increasing

c. Subprime mortgages increased allowing a whole new sector to purchase homes

d. Banks and mortgage servicers increased in numbers.

I think it is c.

Answer 1

Does it have to be solely one answer because it would really make sense for several of these factors to influence the demand of housing during the 2000s.

For prices to increase, there must be one of two factors (or both) at play: supply decreases or demand increases.

With that respect, banks raising lending standards would decrease the number of people eligible for mortgages. Decreasing the number of eligible buyers would decrease the overall demand and price.

Next, supply being stagnant while demand increasing will inherently cause prices to increase.

Subprime mortgages (or those type of mortgage borrowers that would not qualify for regular mortgages based on either their credit, income or the collateral) increased. This unlocked a whole new area of people eligible to buy homes and, as such, increased overall demand and then prices.

Finally, as the total number of banks and other mortgage providers increase, there would be 1) greater competition that would reduce the total cost of borrowing and 2) increase the total supply of mortgages available. Both of these factors would lead to a greater number of borrowers chasing the available supply of homes, increasing the prices.

With this said, all of these are potential answers except for A. I think the answer that would be most linked to the increase of prices in the 2000s would be C, as this was very true and ultimately led to the 2008 Financial Crisis. Some credit could be given to B and also some to D.