Final answer:
The increase in house prices during the 2000 to 2007 period is referred to as a bubble because it was an unsustainable rapid increase in prices that ultimately led to a sharp decline. This rapid increase in prices was driven by factors such as easy access to credit, speculation, and a belief that housing was a safe financial investment.
Step-by-step explanation:
The increase in house prices during the 2000 to 2007 period is referred to as a bubble because it was an unsustainable rapid increase in prices that ultimately led to a sharp decline. During this time, housing prices increased at almost double the average annual rate of the previous decades. This rapid increase in prices was driven by factors such as easy access to credit, speculation, and a belief that housing was a safe financial investment.
However, the unsustainable nature of the housing bubble became evident when prices began to fall in 2007 and 2008. Many banks and households found that their assets were worth less than expected, contributing to the recession that started in 2007. The bursting of the housing bubble had severe consequences for the economy and highlighted the risks of a speculative housing market.