Real Estate Bubbles: Overview Flashcards
What is a real estate bubble?
A real estate bubble occurs when property prices inflate to unsustainable levels due to speculation, high demand, or excessive borrowing.
What drives speculative investment in real estate bubbles?
Speculative investment is driven by the expectation that property prices will continue to rise, allowing investors to sell at a profit later.
How does access to credit and debt fuel real estate bubbles?
Easy access to credit and debt enables more people to borrow and buy property, which increases demand and drives property prices upward.
What is the impact of low interest rates on real estate bubbles?
Low interest rates reduce the cost of borrowing, encouraging homebuyers and investors to take out larger loans, which inflates property prices.
What is leverage in the context of real estate bubbles?
Leverage refers to the use of borrowed funds to finance real estate purchases, amplifying both gains and losses depending on market conditions.
How can government policy and regulation contribute to real estate bubbles?
Government policies, such as tax incentives or subsidies for mortgage lenders, can encourage excessive property development and speculation.
What creates a supply and demand imbalance in real estate markets?
A supply and demand imbalance occurs when there is a housing shortage combined with high demand, driving property prices upward.
How does investor and consumer confidence influence real estate bubbles?
High investor and consumer confidence can lead people to take on more debt and buy property, but if confidence drops, demand can collapse.
What role do global capital flows play in real estate bubbles?
Global capital flows, such as foreign investment, can inflate local property prices and contribute to real estate bubbles in major cities.
What historical event in the early 20th century is an example of a real estate bubble?
The Florida land boom of the 1920s is an example of an early real estate bubble, driven by speculation and easy access to credit.
How did government programs post-WWII influence real estate bubbles?
Post-WWII government programs aimed at increasing homeownership fueled demand for housing, contributing to rising property values.
What was the impact of the 1980s-1990s global expansion on real estate bubbles?
Globalization and interconnected financial markets in the 1980s-1990s led to speculative real estate bubbles in regions like Japan.
What triggered the U.S. subprime mortgage crisis in 2007-2008?
The subprime mortgage crisis was triggered by easy access to credit, predatory lending practices, and speculation in the housing market.
How did post-2008 regulations aim to prevent future real estate bubbles?
Post-2008 regulations included stricter lending standards and measures to reduce speculative investment in the housing market.
What role does technology play in the future of real estate bubbles?
Technology enables easier access to real estate investments, potentially democratizing investment but also increasing speculative risks.
