Is a bubble bursting on the rise?

For example, if prices see a sudden sharp decline, many people who recently bought a place could suddenly be paying for a mortgage that is worth more than their house. While the events that led to the housing crash of 2008 differ from the issues plaguing the housing market today, talk of a bubble bursting is again on the rise.

What happens if a housing bubble bursts?

When a housing bubble bursts, home values can drop, homeowners can lose equity, and, in a worst-case scenario, a recession can occur. The housing bubble of 2006-07 was prompted largely by subprime mortgage lending tactics and speculative investing on the part of banks.

What are the two bubbles that burst in US history?

You’re probably familiar with two bubbles that burst in recent U.S. history. These are the dot-com bubble in the early 2000s and the real estate bubble that heavily contributed to the Great Recession. Put simply, a bubble occurs when the price of an asset or commodity significantly outstrips its fundamental value.

What is the silver lining of a housing bubble?

The silver lining is that housing bubbles tend to be temporary events, meaning the housing market and the economy are eventually able to recover. Housing bubbles tend to occur less frequently than other types of asset bubbles, but they also tend to last longer.