banks

This week I am teaching about the economy...UUUGH....I dont even really like money that much and I think we might be better off in a feudal barter system but I digress. Anyways instead of talking about how the american economy has changed throughout our history I decided to focus instead on the economic crisis that is happening and thus I must understand the root causes the possible ways out and what the hell went wrong. Not only that but I have to be able to distill it (um mm distilled) into a coherent presentation for the students to understand. I think I have gotten a handle on it for the most part. I get the homes and the toxic assets and the short selling, what I am having trouble getting a hold of is why did the home prices collapse so far? Were they just overvalued to begin with? Did the buyers decide that 1.5million for a studio was nonsensical? What exactly caused this problem of home prices falling? Is it simple supply and demand? I know there is some simple reason out there but I cant locate it. As soon as I do that I will be golden and then me and the sec. of the treasury can solve this mess.