Which of the following best describes a "housing bubble"?
A. A sudden drop in housing prices
B. A natural disaster affecting housing
C. A long period of falling house demand
D. A fast increase in house prices beyond their true value
Answer (1)
The correct answer is letter D. A fast increase in house prices beyond their true valueA housing bubble happens when people keep buying houses and prices go up quickly—not because the houses are really more valuable, but because people think the prices will keep rising. It’s like a balloon being blown up too much. Eventually, the bubble "bursts" when people realize they paid too much. In the Philippines, we have also seen areas where house and land prices rise quickly, like in Metro Manila or Cebu, especially near malls or new highways. If the value of the property drops suddenly, people can lose a lot of money—just like what happened in the U.S. during the Great Recession.
