An important question we might ask ourselves is: Are we in another of these housing bubbles? First let me define what housing bubble means. When we call something a housing bubble we mean an increase in housing prices due to demand and investments. They usually start with an increase in demand, with limited supply, so which takes a long period of time to replenish. Investing speculators enter this market, even more driving the demand. At some point, the supply increases while demand stagnates, leading to a drop in prices. This is called the bursting of a bubble. Today, the number of homes being built and going on the market hasn't increased with the number of people wanting to buy a home. The result is that the price of each home has increased. So The question is now, are we or are we not in a housing bubble?
Sunday, December 3, 2017
The Housing bubble pops- Great Recession
The US housing bubble in mid 2000s was linked to another bubble; technology. In 1990s many new technology companies had their stock bid up to extremely high prices in little amount of time. Even startups with barely any revenue were put to bid for quick profits. By 2000, these stocks came crashing down do much lower prices. As investors left the market, real estate values rose dramatically. As it rose, investors began buying property as an investment. Banks lowered their rates of lending requirements as instructed by the government, driving house prices up by 50/100 percent. When the housing bubble was at it's peak, 30 percent of it was supported by investments. At this time the stock market went back up and investors started leaving the housing market and going back into technology. Once the people started realizing the housing prices could go down, the prices started to plummet. They declined up to 40 percent in some areas, and millions were led to forclose their house.
https://www.investopedia.com/terms/h/housing_bubble.asp
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I agree with your idea of housing bubble. In this current age especially in a place like Silicon Valley, the law of supply and demand explain that there are two ways for the housing prices to increase, supply must increase and demand must decrease. However, currently the number of homes being built and going on the market hasn’t increased with the number of people wanting to buy a home. Resulting an continuous price increase in homes. Therefore I think that for now, the interests are still low however as that increases go higher affordable houses will shrink.
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