Low interest rates contributed. But the prime cause of the bubble was government coercing banks to extend mortgages with almost no down payment to those who didn't qualify. We're speaking of people who generally wouldn't have got mortgages even at 0% for a 25 year term. Then there's Fannie and Freddie, serving this same social policy, buying up all these bad mortgages, freeing the banks to extend more of them. In turn these bad mortgages were dumped on Wall Street, which repackaged them as low risk securities
Yes, the Fed could have jacked up rates to arrest this "irrational exuberance." But at what cost to all other industry? Social engineering government is the culprit. All else is distraction.