One of the main reasons the bubble is formed due to the wishes of the national banks, such as the Federal Reserve in the United States to lower interest rates to stimulate the economy. This leads to the interest of some to purchase real estate because it happens that cheaper to acquire property. Therefore, demand is rising. This is the practice of flipping the house in which the home was bought for the short-term profit and the market is further inflated by artificial demand. As demand increases, prices raise - significantly more, in some cases than what can be considered fair market value.
The housing bubble cannot only create a good economic time for the real estate market; you can bring in other sectors. It can help construction companies, manufacturers of appliances, electronics and other products, and to infuse a significant amount of money in the global economy. In this way, you can create a positive situation for the economy in a number of different ways, but this is probably a situation in the short term.
The end of the housing bubble occurs that usually happens when interest rates are raised, which must happen if a country is to operate without crippling inflation. Bankers often called interest rates very low "cheap money.” Therefore, when money becomes more expensive to borrow, there is less demand for housing. Thus, the housing market begins to slow.
When the housing market begins to slow, there are many things begin to happen, however. The first is that applications for new mortgages begin to decline after rapid housing sales - both new houses and existing houses. Some new houses built on assumptions during the bubble, will sit empty. When you slow down enough, the price reduction will be more sellers hope that lower price will encourage potential buyers.
Just as there were very good times in the real estate bubble, it will be very difficult times when the real estate bubble bursts. However, at the end of the housing bubble likely see the market back into balance. Prices will revert to the fair market value and then begin a more gradual climb.
