The origin of this originally young, urban, black style is unknown. A commonly accepted origin theory was that is was an outgrowth of prisons, where inmates' clothing was often too large and sometimes no belts were allowed.
It may be related to skateboard/snowboard fashion.
At least one scholar thinks there is a tie-in with African culture.
There is also some evidence that a male showing his underwear-covered buttocks in prison was, at one point, linked to a desire for sex, or a mark that a prisoner was "owned" by another prisoner, sexually. Whether this kind of showing one's buttocks has any relation to sagging is unclear.
Some areas have begun to outlaw this style recently (2011). Apparently the objection is the amount of underwear shown.
Many myths and lies about sagging have been promoted to discourage the style. Sagging started around 1989 as a way for African American men to avoid what was perceived in the African American community as a homosexual look favored by white men in the mid to late 80s. The manufactures of the most popular brands such as Jordache and Levis did not manufacture jeans that were cut to fit the African American shape. In short, most if not all jeans would fit African Americans very, very tight and to the point that is was uncomfortable. White people tended to favor the tight fit while African Americans shunned it. To make the jeans fit in way that was more acceptable to African Americans, teen age kids and hip hop stars would buy there jeans two or three sizes too big. This started the trend of “baggy clothes.” Sagging became popular as well as a way to avoid the “homosexual look” of tight jeans. Also because the jeans were two or three sizes too big.
I will always be sagging. Let them whiteboys wear them nuthuggers.