Introduction :

A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid speculative increases in the valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic elements.

As of 2007, real estate bubbles are widely believed to exist in many parts of the world, especially in the United States, Britain, Australia, New Zealand, Ireland, Spain, Poland, South Africa, Israel, India, Romania, South Korea, and China. U.S. Federal Reserve Chairman Alan Greenspan said in mid-2005 that "at a minimum, there's a little 'froth' (in the U.S. housing market).

Real estate bubbles are invariably followed by severe price decreases (also known as a house price crash) that can result in many owners holding negative equity (a mortgage debt higher than the current value of the property). As with any type of economic bubble, it is difficult for many to identify except in hindsight, after the crash.

Unlike a stock market crash following a bubble, a real-estate "crash" is usually a slower process, because sellers prefer not to sell their own homes. Due to inflation, prices generally do not fall in nominal terms, rather they stay "flat" for a period of 3-5 years[citation needed]. In some markets though, housing prices have fallen in real and nominal dollars, such as Los Angeles during the early to mid 1990s. However, with the recent rapid run-up it is possible that national average home prices to drop, because past performance is not a prediction of the future.

Other sectors such as office, hotel and retail generally move along with the residential market, being affected by many of same variables (incomes, interest rates, etc.) and also sharing the "wealth effect" of booms. Therefore this article focuses on housing bubbles and mentions other sectors only when their situation differs from housing.