I don't think you can separate the two. Housing starts exploded largely because of the complete collapse of lending standards. Pizza delivery guys were getting jobs as mortgage brokers, and making GREAT money.
The build-up of bad debt was unprecedented, and eventually created a near complete collapse of the financial system. It was, IMO, very close to completely falling apart. Even GE couldn't get the daily credit needed to run their business.
That chart reflects how absurd things got... and, how severely it has corrected.
FYI>>
Also, I feel compelled to ALERT this group to a new, MAJOR FLASHING RED ALERT sell signal.
As of this morning, SCMT is “fully invested”.
Certain DOOM is sure to befall the market.... soon.