[qubax]

> Real estate bubbles rarely burst unless there is accompanying unemployment. The reason is psychological, people hate realizing a loss.

Real estate bubbles generally burst when buy side gets squeezed. It doesn't matter if people sell homes and realize losses. The bursting of bubbles isn't a supply or sell side issue. It's a demand or buy side issue.

But there are many ways the demand side can be squeezed. The most prominent is increasing interest rates. Then there is unemployment as you noted during economic downturns. There are also legal methods - draconian anti-buyer laws. Imagine if a law was passed that banned sale of homes to foreigners and even gave foreigners 3 months to divest all property in X market. Not only would that burst the bubble, it would crash the housing market.

Bubbles form when the demand side is artificially increased while limiting supply side. For example, if you granted citizenship to foreigners if they buy a house. That would spike the demand for homes but the supply of homes wouldn't increase as quickly.

There are a myriad of reasons why bubbles form and why bubbles burst. Ultimately it's the manipulation of supply and demand sides which causes one or the other.