What is a housing bubble?

A housing bubble, or real estate bubble, is a run-up in housing prices fueled by demand, speculation, and exuberant spending to the point of collapse. Housing bubbles usually start with an increase in demand, in the face of limited supply, which takes a relatively extended period to replenish and increase.

Is a bubble bursting on the rise?

For example, if prices see a sudden sharp decline, many people who recently bought a place could suddenly be paying for a mortgage that is worth more than their house. While the events that led to the housing crash of 2008 differ from the issues plaguing the housing market today, talk of a bubble bursting is again on the rise.

Can speculators create a housing bubble?

Speculation can further drive the housing market away from fundamentals, though it doesn't have the force to create a housing bubble on its own. When real estate prices start climbing, speculators might see an opportunity to ride that wave and buy into the real estate market.

Is America's real estate market showing signs of a housing bubble?

America's real estate market may be showing signs of a housing bubble as prices become “unhinged from fundamentals,” according to the authors of a blog post published by the Dallas Federal Reserve Bank. House prices can fall out of sync with market fundamentals like supply and demand when there is a widespread belief that prices will keep climbing.