In Today's NY Times, Robert Shiller writes "How Tales of 'Flippers' Led to a Housing Bubble ... Conventional data aside, narratives show a shifting mentality for quick profits."
In 2008, the explanation was a sudden epidemic of "greed". Now it is "shifting mentality." So who needs economics? Who needs political economy?
Led by a politicized Fannie and Freddie, lending standards were relaxed in the late 1990s and early 2000s. Low-FICO scores were acceptable. Twenty percent down payments were put aside. Fan/Fred may have been conceived as a way to tap international capital markets to help Americans become home owners. But why extend this benefit to the purchase and/or guarantee of 2nd and 3rd homes? Were politics involved? This ground has been covered many times. See, for example, this paper by Calabria.
To be sure, there are always mood swings among buyers, sellers, bankers, etc. And these interact with the political economy involved. Let's not ignore supply and demand -- in this case, supply and demand for favors. What passes for housing policy and monetary policy in modern American involves a good dose of supply and demand for favors.