Anonymous

What is the "Real Estate Bubble"?

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Tom  Jackson Profile
Tom Jackson answered

"Home prices are overheating again. In fact, twice as many metropolitan markets were considered "overvalued" in the second quarter of this year as compared to the first three months, according to a new report from CoreLogic. That is, prices are inflated relative to incomes. This is not, however, a "housing bubble," because by definition, an economic bubble eventually bursts, and home prices are very unlikely to fall."

Go here to understand "economic bubble":          https://en.wikipedia.org/wiki/Economic_bubble

Phil Newton Profile
Phil Newton answered

The real estate bubble, commonly known as the property bubble, is a term that refers to an economic "bubble" that occurs in real estate markets from time to time.  The term bubble arises as property values soar, reaching unsustainable levels, and then decline rapidly, bursting the bubble.

How are real estate bubbles identified?

Over the years, it's been difficult for real estate bubbles to be identified before they burst.  This has been to the detriment of the real estate market that suffers for long periods of time when a real estate bubble does indeed burst.

Once a real estate bubble has burst, property values decline rapidly, and this leads to people holding a mortgage that's worth much more than the value of their property.  This is known as negative equity, which can be disastrous to certain individuals.

If a person has negative equity with their property it means that their assets are worth less than their debts.  In the case where someone can no longer afford to pay their mortgage, their property is not worth enough to cover the debts once sold.  Therefore, the person would lose their property and remain in debt, too.

Ultimately, real estate bubbles are very difficult to identify, although there are modern methods used to attempt to do so.  By measuring the price of property compared to what most people can afford, it is possible to predict when a real estate bubble is one the verge of bursting.

Peeru sah Profile
Peeru sah , New Homes Vancouver WA, answered

Real estate or also known as housing bubble which tells the temporary condition of the real estate of prices and there can be a speculation i.e  fastest increase in the the prices of real estate.

thanked the writer.
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