Causes Of Bubble Burst

If you are real estate buyer or seller you must keep in mind the market value of this business. As value changes in different periods of time. The decline in the growing business comes because of so many causes. Similarly the market of real estate is facing decline because of some reasons that are following; The most important point of decline that must be noted is the increased rates of real estate. In the past decades people invest their money in real estate and gained profit but these days this investment is not beneficial as the value of real estate is so high that the buyers are not available in the market it leads to the decline of real estate. Not only in this market but in every business when the things are too expensive to buy the buyers disappear and the decline is the future of that particular business. So real estate which was considered as the safest investment is no longer considered good. This decrease in buyer results in the decrease of the rate of real estate.

Interest rates are the main cause of the bubble bursting of real estate as in past interest rates were low so the people were able to buy their new real estate. They were not afraid by expensive houses or inflation but these days the interest rates are so high and they are increasing these rates more. In turn it will reduce buyer in the market and become the main cause of bubble bursting. Herd mentality is defined as the psychology of market either it is a market of real estate or stock market. This herd mentality happened many times in the past we can see after having a look in the past. stock market bubble of US in 1970 is present before us .similarly the bubble of real estate of Japanese appeared in 1980 and the rail road bubble in 1980 by USA air is crystal clear that when all of these historical bubbles burst then US was thrown into recession.

Some fools are present in the market and they keep on buying even at high prices, the size of bubble increases as long as these greater fools are present in the market. When they reduce the bubble bursts and the result is the decrease in the rates of real estate. With the changing value of the real estate most of the in festers and buyers are getting afraid about the decreasing value of real estate. So they are selling their houses quickly. This is also another reason of increase of houses in the market and another reason of bubble burst. In the end we may conclude that in the last 5 years the investment in the market of real estate showed an explosive growth but the people who are thinking these days to invest in it will find nothing but loss as because of above mentioned reasons the market is going towards decline instead of growth. So it is necessary to keep them in the mind.