The housing bubble left many investors with empty pockets. There are many people talking about real estate housing bubble for years now. It is necessary to point out some mistakes that created the real estate crisis. In an effort to educate people and avert a similar crisis again in the future, we have laid down five biggest mistakes that created the crisis. The U.S. Treasury Secretary called the bursting housing bubble "the most significant risk to our economy.

Following are 5 biggest mistakes made by investors which created the housing crisis in the most populous part of the nation:

1.      Overlooking the past – Probably the most amazing mistake! As we all know that history repeats itself. Most of us don’t learn from the history and make the similar mistakes again and again which is not a rational thing to do. A decade before housing bubble started, dot-com bubble in the stock market produced the same results and it was a disaster. People lost their pensions, retirement, homes, etc. during the bubble burst, yet most of the real estate investors overlooked it and they didn’t remember that what goes up exceptionally fast has to come down at the same speed.

2.      Overexcitement – During the housing bubble, the market was way over inflated. It really doesn’t take a cardiovascular surgeon to see that the market was unstable and it could create losses. But investors became overexcited. Everyone was talking about how much they could make buying property. They lost in the hype and forgot about what is the most important thing to consider when it comes to real estate investment – numbers. 

3.      Overlooking the Numbers –It is very hard to ignore the hype and purchase a property based on proper evaluation especially when you see that every property in the country is rising at a highly unusual rate. Tens of thousands of investors ignored what was important – the numbers. The bought properties on nothing but hope.

4.      Emotional Desperation – It’s human nature to do stupid things in desperation. What would you do when everyone around you is in frenzy? There were days when properties went on the market and had 10 or more offers by that night. For investors, bidding wars are lose-lose situation and is mostly driven by emotional attachments. Investors tend to forget about the realistic evaluation of the property. The fear that the market is climbing and you are missing the boat is definitely not a reason to invest in real estate. In the world of real estate, slow and steady wins the race.

5.      Greed driven decisions - Greed is a vice. Everyone knows it. But when the time comes, everyone gets greedy. Investments driven by greed tend to lose their ground. Many people complain about the losses they are taking. A living example of greed is that you buy a property and after three years, you sell it on a doubled rate. But when the same property rises up and you see that the rate is climbing, you tend to buy the property again to sell it on a higher rate. That is a mistake. Many investors lost their money doing this type of stuff.I know a lot of investors who purchased near the top of the bubble at crazy prices and they got greedy. It is a proven fact that no market will go up forever. These thing are cyclical especially the real estate market. When greed takes the best of you, disaster is lurking nearby.