What is a real estate bubble?
Real estate bubble occurs when real estate prices rise rapidly in a short period of time. Inflation and wages often cannot maintain the pace with rising real estate prices, which means that the price increase will eventually become unsustainable. The direct negative effects of real estate bubble include increased seizure and indirect effects may include a higher unemployment rate. If there are more buyers than home for sale, competition among buyers leads to an increase in real estate prices. Many buyers consciously pay excessive prices for property in the belief that the longer they are waiting for purchase, the more prices will increase. Buyers' desire to participate in the real estate market before the houses become disproportionately expensive, the main driving force is a typical real estate bubble. Central banks often reduce interest rates to make loans for companies cheaper and this cost savings facilitate expansion and hiring new employees. As businesses expand, more people can afford to buy houses whatIt causes an increase in housing demand. Building companies cannot always build enough new houses fast enough to satisfy this demand. As a result, real estate bubble occurs.
When houses become disproportionately expensive, a large number of people cannot afford houses and, as a result, the supply of houses prevails about demand. Existing real estate owners are forced to sell their homes at prices under the market, because otherwise they are not able to attract buyers. Given that the growing number of house owners sells their homes at lower and lower prices, the real estate bubble will end. People who bought the houses Prior to the end of the bubble have mortgage balances that exceed the value of their property. These people cannot sell their homes unless they have sufficient savings to cover excessive debt.
people who cannot afford to pay mortgages before selling their homes often end up in closurethe market. The high number of seizures causes real estate prices to fall even further. Investors lose money due to falling securities prices that are tied to mortgages and real estate. As a result, investors have less money to spend, which means that corporate profits are falling and companies are starting to reduce costs by dismissing employees. In the end, housing prices will drop so low that the buyers are attracted to the market and are looking for shops, and as more people start buying real estate again, a new real estate bubble begins to form.