How did the housing market get to where it is today?

If you've ever asked that question (and chances are that if you own a home you have), here's a possible answer.

It wasn't inevitable that Alan Greenspan would tout adjustable-rate mortgages in February 2004, when the average rate on a 30-year fixed was hovering just above 5.5 percent. Remember what Greenspan said back then? "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage."

I repeat: When Greenspan uttered those words, the average rate on a 30-year fixed was 5.6 percent in Bankrate's weekly survey. Five-point-six percent for a fixed-rate mortgage, and he was saying how adjustable-rate mortgages were a good deal!

It wasn't inevitable that lenders would take Greenspan's hint to provide greater mortgage product alternatives. They started marketing subprime ARMs to anyone with a pulse who was willing to exaggerate his or her income. It wasn't inevitable that lenders would underprice their risk (or, in other words, charge rates that were too low). It wasn't inevitable that so many borrowers would lie about income or occupancy status on their loan applications.

It wasn't inevitable that homebuyers would get swept up in the mania, taking advantage of cheap loans to bid up the prices of houses past the point of common sense. As a matter of mass psychology, the house mania was understandable. But it wasn't inevitable. Some people saw that they were in a housing bubble, and they didn't succumb to house fever. Two-and-a-half years ago I profiled four families who were what I dubbed bubble sitters -- they saw that house prices were inflated, so they chose to rent. They waited for the bubble to pop.

"I'm pretty sure the prices around here will plummet," economist Dean Baker said in the summer of 2005. A few months before I interviewed him, Baker and his wife had sold their two-bedroom condo in Washington, D.C., and rented a similar unit nearby. "We felt it would have been foolish to stay there," he said.

Prices fell later than Baker had expected. But the bubble did burst, and prices did fall. He and the other bubble sitters were right.

You didn't have to be an economist like Baker to see that a bubble was inflating. The Fed, legislators, the White House, regulators and lenders could have recognized the problem before it got too big. The bubble and the burst weren't inevitable.

For Paulson to say that the housing bust was inevitable would be like saying that Bill Clinton's heart bypass surgery in 2004 was inevitable. The guy clearly liked Big Macs and doughnuts. After he ate a train carload of them, a heart bypass was necessary. But it wasn't inevitable. He could have chosen to eat broccoli and falafel instead of burgers and fries.

Policy makers, lenders and borrowers made choices that caused the housing bubble to inflate and for it to pop. Nothing inevitable about it.

RATES: Bond prices have spiked since Friday's lousy employment report, and that means mortgage rates have plunged. In last week's Bankrate survey, the average rate on a 30-year fixed was 6.14 percent. This week, it's on track to be 5.9 percent. It hasn't been that low since September 2005.

Take that as a hint that this would be a good time to get a fixed-rate mortgage instead of an adjustable-rate loan.