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, Italy, Australia, New Zealand, Ireland, Spain, Poland, South Africa, Israel, Greece, Canada, Norway, Singapore, Sweden, Baltic states, India , Romania, South Korea, Russia, Ukraine and China.[citation needed] 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) … it's hard not to see that there are a lot of local bubbles" [1]. The Economist magazine, writing at the same time, went further, saying "the worldwide rise in house prices is the biggest bubble in history".
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).[citation needed] As with any type of economic bubble, it is difficult for many to identify except in hindsight, after the crash. The crash of the Japanese asset price bubble from 1990 on has been very damaging to the Japanese economy and the lives of many Japanese who have lived through it [3], as is also true of the recent crash of the real estate bubble in China's largest city, Shanghai.
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. 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.