Bubble

When the value of an asset rises and rises—not because there is actually scarcity and rise in demand. During a market bubble, the value of an asset goes up and up. Just like a soap bubble, though, it eventually bursts and it can be quite messy. When a market bubble bursts, investors can lose a lot of money.

Example

Before 2008 or so, many parts of the country saw a housing bubble. The real estate market was hot, and not just because of all the good-looking condos being sold. Real estate looked like an amazing deal and investors bought and bought houses and property in droves, borrowing money to buy houses. All the demand made the market even hotter, and contractors were building more houses and more investors were getting in on the action.

Then the bubble burst.

The price of houses dropped—er, more like nose-dived. Investors who had bought houses now had property that was worth less than what they owed on the homes and no one was buying. Messy.