Yes, the housing market was very hot in the 1997-2001 period, but it was starting to cool in 2001 — which was the PEAK of the “normal” RE cycle, IMHO.
Budget constraints were already slowing things down in 2000/2001, and the stock market was turning down, which is why they needed to lower rates in order to take advantage of the upward momentum in housing — if people saw that housing prices could rise during a recession (happening again!), then they would be more inclined to continue speculating in the housing market. This was the most effective way to get money flowing into the economy. There is no other asset out there that can be leveraged so easily by so many.
If you’re trying to solve the problem of shrinking liquidity and a reduction in wealth (due to the stock market losses and job losses in the tech industry), just lower rates and target the biggest asset market that uses credit that’s freely available to the greatest number of people: the housing market.
IMHO, the housing bubble was planned from the very beginning.
