what exactly is the "housing bubble"?

Answer 1

As the term is thrown around at the moment, it includes several things:

- Home prices in some regions have risen too fast and finally become unsustainably high. This means that suddenly fewer people will be buying new homes because they're too pricey, and existing homeowners trying to sell cannot get the prices they would have expected, and may have to take a loss in selling their house.

- Homebuilding corporations such as Pulte Homes will have been producing too many new houses in anticipation of a strong housing market; suddenly they'll find they can't sell many of them -- and they get stuck with unsold inventory. As with any business, if you can't sell your product you may have such cash flow problems that you go bankrupt or at least suffer.

- add to the above, some people will have taken out mortgages that they cannot afford. Now they have trouble making payments -- usually in the worst case you could sell the house to pay off the debt. But now, if you sell the house you won't raise enough money to pay off the mortgage, so you're screwed. You get foreclosed on, lose your house, and now the bank is selling it at auction.

Add all these things together, and the simple fact of houses getting overpriced leads to lots of financial problems for individuals and businesses.

Answer 2

1)It's a situation in which price of an asset, such as a share, rises fast because of buyer enthusiasm which is speculative in nature. Expectations of higher prices in the future cause people to buy, driving up price. Eventually, the market loses confidence that the price will rise further. Demand dries up, the price collapses and the bubble bursts.

2)Housing bubble is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid speculative increases in the valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic elements, followed by decreases (also known as a house price crash or a market correction) that can result in many owners holding negative equity (a mortgage debt higher than the value of the property). Just like any type of economic bubble, it is difficult for many to identify except in hindsight, after the crash.