Housing bubbles across the world were built on securitization. Banks bundled their high risk mortgages into bonds and sold them onto unwary investors. In return, banks received cash that allowed them to issue more mortgages. This recycling of loans created unprecedented levels of credit and fueled the extraordinary run up in house prices.
With the onset of the credit crunch, mortgage securitization has all but died. In October this year, residential mortgage backed securities issuance was just $10 billion; barely 5 percent of the March 2007 peak.
Without securitization, it will be impossible for housing prices to stabilize and recover. Without credit, there can be no housing bubble.