Several factors can contribute to the formation of a housing bubble:
1. Speculative Investment: Investors buy properties not for personal use, but with the expectation that prices will continue to rise, allowing them to sell at a higher price. 2. Low Interest Rates: Prolonged periods of low interest rates make borrowing cheap, encouraging more people to take out mortgages and invest in real estate. 3. Loose Lending Standards: When financial institutions have lax lending criteria, they approve more loans, even to those with poor credit histories. 4. Economic Growth: Robust economic conditions can lead to increased consumer confidence and spending, driving up real estate prices. 5. Government Policies: Policies that promote homeownership, such as tax incentives or subsidies, can artificially inflate demand.