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DEFINITIONS

Real estate bubble

Definition

A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in the valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic indicators, followed by decreases that can result in many owners holding negative equity (a mortgage debt higher than the value of the property).

Additional - what is the meaning of Real estate bubble?

Unlike a stock market crash following a bubble, a real-estate "crash" is a slow process, because sellers just decide not to sell. Historically due to inflation, prices did not fall in nominal terms, rather they stayed "flat" for a period of 3-5 years. However, due to low inflation in most countries, future corrections may result in a fall in both real and nominal house values.


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