With all of these different asset-backed securities trading on the market, and profits soaring for the main players in these transactions, most people thought that the housing market would continue to boom.
However, this was not the case. By the middle of 2006 home sales stalled and the value of houses stopped climbing. By 2007 many homes’ values began to drop.
With housing values decreasing, many new sub-prime home owners could no longer afford their houses by refinancing, and this led many of these home owners to default on their mortgages.