In October 2007, the US Secretary of the Treasury,
Henry Paulson, called the bursting of the bubble “the most significant risk to our economy”.
In response to this surplus building output was reduced and house builders were forced to
reduce the sale price of their new properties. The reduced demand for new homes placed
pressure on companies initially in the house building sector and subsequently those allied to it.
A significant number of house builders either downsized or went into liquidation, contributing
to the pool of unemployed. As this pool grew it expanded the number of mortgage defaults,
driving up the number of vacant properties.