The bursting of a housing bubble can have severe repercussions:
- Price Decline: Real estate prices plummet, leading to a loss of equity for homeowners. - Foreclosures: As property values drop, many homeowners may find themselves with negative equity (owing more on their mortgage than the property is worth), leading to increased foreclosures. - Economic Recession: The ripple effect of a burst bubble can trigger a broader economic downturn, as seen in the 2008 financial crisis. Reduced consumer spending, lower business investments, and tightened credit conditions can all contribute to a recession. - Unemployment: Sectors directly related to real estate, such as construction and banking, may experience significant job losses. The broader economic impact can also lead to higher unemployment rates.