A housing bubble occurs when the prices of homes rise rapidly due to high demand, speculation, and easy access to credit. This surge in prices often leads to homes being valued much higher than their actual worth. As more people invest in real estate, the market becomes overheated, creating an unsustainable situation. Eventually, the bubble bursts when demand decreases or interest rates rise, causing home prices to plummet. This decline can lead to financial losses for homeowners and investors, and may result in a broader economic downturn. The aftermath can affect related sectors, such as construction and mortgage lending.