The Bubble Pops, and the Madness of the Crowd

It's been going around the personal finance blogging community: "The real estate bubble has finally popped." When I read an article about this earlier today, it immediately brought to my mind the image of people in Holland paying the price of a house for tulip bulbs, just because "everybody else is doing it".

That's exactly what the real estate bubble is all about, and that's exactly what the bursting of the bubble is all about. Sure, there are other economic factors, but economics itself also boils down to an experiment in psychology, or why people do the things they do.

It may be giving too much credit to bloggers, but they are definitely part of it. "It" being, of course, the effect of popular opinion on market trends. If enough bloggers say, "The bubble is starting to burst," then the bubble will start to burst. People who think that they can wait a year and get a much cheaper house will put off buying that house, contributing further to the decline of real estate prices in their area.

So, in the interest of being able to afford a house in the not-too-distant future, I'd like to put my two cents in and say, "The real estate bubble has popped." There, that should do it.