Explanation of the Global Housing & Apartment Bubbles
Both global and local real estate markets can experience housing bubbles. What happens is that the values of the real estate properties increases until it becomes unaffordable, thus the buyers stop buying. Once that happens the value drops way down and people who once had property with a positive equity will find themselves upside down, meaning what they owe on the mortgage is more than what the home is currently worth.
What causes this to come about? The US tax policy plays a role with the exemptions of housing from capital gains, also factored in are interest rates that are too low, regulators that fail to respond, tax lending standards and the speculators that go overboard. The United States isn’t the only country affected by the housing bubble; Hong Kong, Hungary, Poland, South Korea, Spain, and the United Kingdom are also affected.
The USA has seen a fairly steady increase in home prices since 1890 with the largest increases from 1940 to 2004. This current short term apartment bubble began in 2005 and 2006. This happened when the impact of the huge number of home owners were unable to make their mortgage loan payments. It was the subprime mortgages that were given out by lenders that was responsible. The low intro interest rates enticed many to purchase a home who could not afford the house payment once the regular mortgage rates came into play. Before that happened the value of homes were way over inflated, then when the failure hit, values dropped to historical lows causing economic failure.