What was the root cause of the housing bubble?

What was the root cause of the housing bubble?
Subprime mortgages offered to people who couldn't afford the payments.
Banks would give $200,000 dollar loans to people earning $30,000/year. The banks could also issue adjustable rate mortgages. The banks could then change the interest rates as they saw fit, making people unable to pay the monthly fees.

The bubble is caused when people have the false belief that real estate is an investment that will never depreciate. People thought they could buy a house for $200,000 and next year it would be worth $250,000 and they could then sell the house for profit. This caused many people to buy houses. When the stock market took a tumble, people panicked, and everybody sold their houses. This led to an increase in supply, which caused the price to drop.

Supply vs. Demand