Real Estate Bubble can be either a property bubble or a housing bubble. To understand these terms first, we must understand what an economic bubble is. An Economic bubble is a state where the price of real estate properties go high and finally drops to a very low price. Usually, a bubble is preceded by a land boom. However, there are different schools of thought for the same concept. Economic bubbles include real estate bubbles, stock market bubbles and so on. Among them, housing bubbles are considered more critical.
Housing Bubbles in the US:
The financial crisis in the year 2007-2008 marks the beginning of the housing bubbles in the real estate market. The US housing bubble happened due to the effect of this real estate bubble. The prices of the house properties started to increase, and they sharply fell after touching the peak. It was the largest price drop in history.
When the land boom happens, the property owners and investors may find a temporary boost in profits, but they are not the permanent ones. If you are a person who is dependent on the long term wellness of the markets, then a land boom is actually an indicator of the impending sickness that might show up in the market. The economy might face an imbalance and if proper measures aren’t taken it might even stumble.
Since the intrinsic value of the properties is quite hard to estimate, a real estate bubble cannot be identified in the earlier stage. But economists also have an opinion that when these bubbles occur, they help the nation’s economy to stabilize. So it is better that the nation finds its own way out of it and they need not have to be treated.
Is the US ready for a housing bubble?
For a large economy like the US, house markets fluctuations shouldn’t be a threat. However real estate is a trillion dollar business and to stay without losing cool is close to impossible. Any superpower economy will feel the heat of the crisis within months of the bubble. Like we stated earlier, tackling a bubble wouldn’t be a problem if we could understand the signs in the earlier stage.
So if there is a sudden housing bubble taking place in the economy, the US markets are vulnerable to it. However, unlike the other countries the US might not find it hard to recover from the clutches of these economic bubbles sooner or later, it will revive its market.