What is a housing bubble a housing bubble describes a period in the real estate industry when house prices grow to above-average something outside the norm, like demand, speculation, or overzealous investing, drives house prices up until they can no longer be supported.
Asset bubble / derivatives / equities / fixed income / policy-driven / real estate although much has been written about the evidence of a financial bubble in the housing and mortgage markets before the financial crisis of 2008, far less attention has been devoted to what caused the bubble to form in the first place four primary causes. Mishkin (2008, 2009) and other policymakers have argued that there are two categories of bubbles: unleveraged ‘irrational exuberance’ bubbles and ‘credit boom bubbles’ in the latter, a positive feedback develops that involves credit growth, asset prices, and increasing leverage. The underlying causes of the housing bubble are complex factors include tax policy (exemption of housing from capital gains), historically low interest rates, tax lending standards, failure of regulators to intervene, and speculative fever this bubble may be related to the stock market or dot-com bubble of the 1990s.
The stock market bubble of the 1920s, the dot-com bubble of the 1990s, and the real estate bubble of the 2000s were asset bubbles followed by sharp economic downturns asset bubbles are especially devastating for individuals and businesses who invest too late, meaning shortly before the bubble bursts.
Low interest rates are the most frequent cause of an asset bubble they create an over-expansion of the money supply hence, investors can borrow cheaply but cannot receive a good return on their bonds so they look for another asset class. Today on crash course economics, adriene and jacob talk about the 2008 financial crisis and the us goverment's response to the troubles so, all this starts with home mortgages, and the use of mortgages as an investment instrument.