The long-term visualization of home prices in the U.S. tells an interesting tale of overall domestic growth, labor force demographics, and mortgage industry changes.
Beginning in 1975, housing prices rise fairly steadily. A number of industry reforms aimed at providing credit to underprivileged demographics may have aided this growth (most taking place in the 70s.). However, labor force demographics are likely the main drivers, as baby boomers entering the labor force created higher demand for housing following 1980s economic expansion.
Home price growth was relatively flat throughout the early 90s, but seemed to increase exponentially from 1995-2006. Early home price growth in this period may be attributed to baby boomers moving from urban to suburban residential communities as they started families. Homeowner demographics also changed as easier access to credit allowed for lower income individuals to be accepted for a mortgage. The securitization of mortgages allowed mortgage-lending institutions to supply the loan and sell the debt, removing the risk associated with lending to less qualified mortgage applicants.
With more “qualified” mortgage applicants, demand soared until 2008. Once home prices had plateaued, lower income individuals could not refinance their homes using higher market values. As a result, many defaulted on loans and walked away from their debt obligations. Housing supply was in a large glut, leading to a collapse in home prices (and in the prices of mortgage-backed securities), and the ensuing recession.