The Biggest Bubble Ever

No one disputes that housing prices in the United States since 1995 have soared way beyond inflation. However, that alone does not reveal a housing “bubble.” Escalating home prices could be caused by a shift in fundamental economic factors that leads people to value home ownership more than they did before, in relation to other goods and services.

On the other hand, if home prices rise without regard to real value, then we have a bubble in the making. A bubble forms as rising prices lure more buyers into the market who are looking to build equity before prices rise further, regardless of the real value of the asset. This increases demand, prices rise even more, and the cycle continues