What is a housing bubble?

real estate

© Andy Dean

When there is a significant demand for housing in a given area, it is going to drive the prices up for those listings. This is referred to as a housing bubble. From a seller’s point of view, it is exciting as it can help them to get top dollar for a home they put on the market. From a buyer’s point of view, it means they will spend more to get the home they really want in that location.

When interest rates are extremely low and lenders are giving money left and right, it can be prime for a housing bubble to occur. At a lower interest rate, most consumers don’t think twice about getting a more expensive home. This is because the monthly payments still remain within their budget.


This concept of a housing bubble can also create chaos and anxiousness among potential buyers. Rather than holding out and waiting for that bubble to burst, they feel obligated to get a home as soon as possible. They worry the prices will continue to increase, and their options will become increasingly limited.

The drive means the prices of homes are significantly higher than they usually are for a similar location or dwelling. This can entice homeowners to put theirs on the market at that point in time. Perhaps they were dragging their feet or just thinking about selling. Knowing they can get a very good price for it though is often the incentive they need to move forward with listing it.

How long does it last?

The length of time a housing bubble is going to last will depend on many factors. There is no specific time frame; it depends on the variables in place. They typically last for a period of at least six months. Sometimes, they can last for several years. A qualified mortgage broker can help you to understand where in the cycle that process is based on the current factors and point in time.

In reality, these high driven prices are just not going to be able to last. They can’t be sustained as those who can wait to purchase a home in the area are likely going to do so. They will wait for those prices to go back down. As a result, homeowners with a desire to sell are going to drop the prices so they can get out from under that home ownership.

Economic impact

When a housing bubble is in motion, it doesn’t just affect buyers and sellers. It affects everyone in that community and the overall economics. It can result in people searching for better paying jobs so they can afford to buy a home. It can result in people considering using their savings or retirement to pay off a home so they can resell it and make a profit.

Sadly, a housing bubble can cause someone to lose all of their savings just trying to get into a home they really need. There are ups and downs with it depending on your role within that housing bubble.

Bubble bursting

Eventually, the housing bubble is going to burst. This can be due to a lack of homes on the market or a lack of potential buyers for those listed. Talk to a mortgage broker about the options and what they feel your best move should be. They will have a good insight into the market, and they can share if you should buy a home at this point in time or patiently wait for the bubble to burst. You want your money to go as far as possible for this very important purchase.


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