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or foreclosed home as a way to get rich quick, you've encountered them and their appearance in the marketplace is one significant factor that fueled the rise of the bubble.

Irrational exuberance or the tendency to speculate wildly in the market place in an attempt to get rich quick is only one factor, although in 2002, irrational exuberance was the missing factor from the mix necessary to declare a state of "bubble madness" was present in the housing market. Yet it was indeed present, and the bubble expanded rapidly over the four years that followed, until its collapse became noticeable in 2007. By then, unfortunately for millions of new homeowners, it was too late to get out of the market and foreclosures and bankruptcies began to eat up the wealth of the nation at an alarming rate.

While irrational exuberance appears as the final component necessary for the creation of a housing bubble, what are the other factors required for a bubble to form in the marketplace? In TrendWatching, Insana provides five fundamental market forces which have been present when similar bubbles have appeared. In order to apply these fundamentals to the housing bubble, one must examine each of them in light of evolving market, regulatory and financial conditions over a period of time. This will establish the context of the bubble and, notably, the presence of these factors will certainly have an influence on a wide variety of markets.

For the purpose of understanding the housing bubble, it is important to study each in the context of the time period, 2002 through 2008. As presented in TrendWatching, these factors are:

The development or discovery of a transformational technology that captures the attention of investors.

A watershed event that sparks a change in monetary policy.

A watershed event that sparks a change in fiscal policy.

An opportunity for investors to speculate in a hot, new asset class.

Investors believe that this asset class will provide above-average return without interruption for the foreseeable future.

An in-depth exploration of these factors is beyond the scope of this article, and is left to the reader to pursue. It is important, however, to point out that the economic stability of the nation was categorically impacted by the terrorist attack of September 11, 2001. Subsequent events, like Hurricane Katrina and other natural disasters, occurring over a relatively short period of time following September 11, have also contributed to a period of financial uncertainty

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