It was a wide variety of factors. And greed on the part of many buyers was part of it (as was governmental policies) - such as folks buying as much house as possible on interest-only loans or wth ARMs, instead of buying something they could afford with a normal mortgage, all in the hopes of flipping the house before the adjustments happened.
As long as we run around pretending just one party was responsible, we're probably doomed to repeat this mess again in the near future.
Not really. You are confusing a cause with factors that facilitated the process or served as intermediaries that produces a result.
For quite a long time the home-ownership level stood at about 65% in this country. This was a quite stable equilibrium. The government literally whacked the market by MANDATING that homeownership increase via the (1998 reformulation of) the Community Reinvestment Act. This was the cause. The rest was merely a mechanism for producing the result.
Markets FACILITATE the balance of demand and supply. The government artificially increased the demand, and the market started to move the economy towards a new equilibrium. That equilibrium proved, unsurprisingly, to be unreachable.
We all use what's available when performing a task. It is only natural that the markets used available instruments --- CDOs, MBS, derivatives --- to facilitate the supply-demand parity. Socialist propaganda claims that these instruments caused the crises. It is easy to see that this is false. Derivatives existed for centuries. Mortgage-back securities existed for about three decades (and actually were CREIDTED in our wonderful boom of 1990s. We had no crises. The ONLY new component is the push from the Community Reinvestment Act, which raised ownership from 65% to the unsustainable 69%.
Even simpler. If a passenger grabs the wheel of the car you drive and sends it into a ditch, it is that person that CAUSED the accident. To be sure, the wheels continues to spin and the engined continued to work, but it would be silly to say that the too were "factors" in the accident. The engine and wheels are merely facilitators; they lead the car wherever the steering wants it to go. The markets similarly moved the economy where the GOVERNMENT via its Reinvestment Act wanted it to go. What we see is yet another (just like in 1929, when the governmnet turned a regular recession into a Great Depression) case of GOVERNMENT failure. (In the 1930s they too blamed "Wall Street speculators for the calamity; lacking imagination, socialists always say the same thing; the sad part is that, like in the 1930s, conservatives buy this garbage).
"And greed on the part of many buyers was part of it (as was governmental policies) - such as folks buying as much house as possible on interest-only loans or wth ARMs, instead of buying something they could afford with a normal mortgage, all in the hopes of flipping the house before the adjustments happened."
Thank you for pointing this out: it is quite common on this forum to attribute "greed" to Wall Street and portray "folks" as innocent victims.
In the present hysteria I would avoid referring to "greed," however: it's the words the left uses to entice class warfare. The neutral term is self-interest (and "wealthy" instead of "rich").
I would also note that the behavior you described is quite rational. If some bonds promise a better return than stocks, people move their 401K money into bonds. The GOVERNMNET interference made houses a more promising investment, and people reacted accordingly. That's all.
I don't condone the blind following by the people and wish they were more careful and foresightful. But people are they way they are. Most don't understand finance and act on the basis of intuition and what their neighbors do. That is why those that lead them have a fiduciary duty. The GOVERNMENT (not the markets) has failed them and led them into a blind alley.