A housing bubble is on everyone's mind right now — here's what it is and how to know if the US is in one
So what is a housing bubble, how did the US get here, and what will happen if it bursts?The most recent housing bubble is borne out of a severe imbalance in the real estate market.
It is somewhat different than the housing bubble that preceded the 2008 crisis, when a combination of cheap debt, perverse incentives among, and complex financial engineering led to many borrowers being placed into mortgages they could not afford. When that bubble burst, it triggered a foreclosure crisis among homeowners, as well as a credit crisis among the investors who owned bonds backed by these underwater mortgages. The end result was a globalSpurred by cheap mortgage debt and the need for more space, buyers are clamoring for a limited amount of inventory, and home sellers capitalize on that by raising prices.
The concern of a bubble bursting is when — and how quickly — the market rebalances. An abrupt shift could result in turmoil. 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.
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