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, creating an unsustainable market. When the bubble bursts, prices can plummet, leaving homeowners with properties worth less than what they paid. The causes of a housing bubble can include low interest rates, investor enthusiasm, and a lack of housing supply. When these factors change, such as rising interest rates or increased housing inventory, the bubble can deflate, leading to significant financial losses for many, including banks and investors.