Real Estate Investing Information Blog

The United States housing bubble is the real or hypothesized economic bubble in several parts of the U.S. housing market since 2001, particularly in populous areas such as California, Florida, New York, the BosWash megalopolis, and the southwest markets. A real estate bubble is a kind of economic bubble that occurs periodically in local or global real estate markets. Based upon the unprecedented rise in house prices since 2001, many economists consider that there is a housing bubble in these and other parts of the U.S. caused by historically small interest rates and a mania for purchasing houses; they quarrel that this bubble is related to the stock market or dot-com bubble of the 1990s. Other economists argue that new price increases can be explained by limited supply and increased demand owed to immigration and demographic forces.

A housing bubble is characterized by rapid increases in the valuations of real property such as housing until indefensible levels are reached relative to incomes, price-to-rent ratios, and further economic indicators of affordability. This in twist is followed by decreases in home prices that can consequence in many owners holding negative equity, a mortgage debt higher than the worth of the property.

Bubbles may only be definitively recognized in hindsight, after a market correction. The crash of booming home valuations on the U.S. economy since the 2001–2002 recession is a significant factor in the recovery because a large part of consumer spending came from the related refinancing boom, which concurrently allowed people to reduce their monthly mortgage payments with minor interest rates and withdraw equity from their homes as values increased. As the once-booming U.S. housing market softened in 2005–2006, economists debated whether this is a "soft" or "hard" landing and the crash this slowing will have on consumer assurance and on the whole economy.