What is a housing bubble?

A housing bubble is the term used in real estate and business when home prices increase drastically because there has been an increase in demand. When there is a housing bubble, the real estate market is generally called a seller’s market. This is because there are more people interested in buying homes than there are available for sale. This can allow buyers to drive up their listing prices, and ultimately make more on their home.

However, the market can’t and won’t stay like this forever. When people who are contemplating selling their homes see that homes are selling for high prices, more people may list their homes for sale. The more people who do that drives down the demand and therefore, home prices will be driven down as well. At this point, the bubble has burst. The market may level out or simply turn into a buyer’s market, where buyers have plenty of options and can negotiate the home price much lower than initially listed for.

Sometimes housing bubbles vary from city to city or state to state. As of August, homes were overvalued in Denver, Houston, Miami and the metropolitan area surrounding Washington D.C., according to CNBC. Housing bubbles in San Francisco and the New York metro are on their way out.

Experts say that the only reason people can still afford to buy homes across the country is that mortgage rates are pretty reasonable, but that may not last forever.

If you have questions about buying or selling, contact our firm today.

Joseph Gachko, Esq. is an experienced New Jersey attorney who can assist you in any of your estate or real estate-related legal matters. If you require legal counsel for your real estate matters, please contact The Law Office of Joseph Gachko today to set up a consultation.