Sort of complex. House values went down so people lost the ability to get credit and a lot of folks lost their ability to sustain their lifestyles. Spending went down. People lost jobs. It was a big downward spiral.

People were unable to move to seek better opportunities because they were underwater on house loans. Ultimately, banks were affected because their customers were hurting.

Edit: oh and I forgot variable rate mortgages. As the economy got worse, payments went up. And this primarily affected folks who could barely make their payments as it was.