How is the market impacted by a housing bubble?

Ask any child if they think blowing bubbles is fun, and they will probably answer “yes.” However, every bubble is bound to burst, which is a daunting but important fact to remember about housing bubbles.

A housing bubble is a trending increase of housing prices driven by an increase in demand, speculation and high spending. The “fun” of the bubble takes place while this bubble is expanding, especially for those selling property. However, once demand decreases while the supply of property increases, the bubble bursts, resulting in a sharp decrease of prices.

Understanding housing bubbles and how they affect the economy can help you adjust your investments and make investment decisions that protect your savings and help you grow your wealth in the long run. 

How does a housing bubble affect the market?

Housing bubbles can last for years. When they burst, they can significantly impact the value of real estate property. This not only affects those who own real estate, but it also affects the average person who simply wants to own their home. 

A burst housing bubble can force people to look for different ways to pay off their mortgages, such as digging into their retirement savings or selling investments early or at a loss. Additionally, the ripple effects across the market can lead to financial crisis, as is evidenced by the financial crisis of 2007-2008, which is widely regarded to have been the result of a housing bubble.

Talk to a ProVise CFP® professional about protecting finances when a bubble bursts

Housing bubbles are not the only bubbles that can grow and burst in the economic landscape. The stock market can bubble and other investment channels can bubble too. While these happen more regularly, it is still wise for investors to have a strategy for getting the most out of their savings and revenue during these times. This is difficult to do on your own, but a financial advisor can help you make the right decisions that work for you.

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about protecting your investments? Contact ProVise today to schedule a complimentary consultation.