California at Height of Bubble

The inflation and subsequent puncturing of the housing bubble has played a great role in the unfolding crisis. Housing is vital because it is the collateral behind a great deal of US debt. Essentially, a great pile of debt and derivatives was erected on a dubious foundation. A leader of the pack was California. With a little money down, which was still required at the beginning of the boom, and you could just print money.

California, like Florida and Arizona, was an extreme case. But the mania was general. From 2000 to 2006, the total retail value of housing in the United States doubled, going from roughly $11 trillion to $22 trillion in just 6 years.

As of October 2008, the situation had deteriorated dramatically.

At the end of 2008, Mr. Mortgage delivered yet more New Year's glum in this table, which he calls "the scariest housing-related chart ever."